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S&P: 2008 Oil Prices to Range Between $41-$141

Written By Brian Hicks

Posted April 25, 2008






When you are an investment analyst, tracking the assessments of others is part of the business. Some are good. Some are bad. And some are just plain ugly.

The fourth category, however, is one that I call the completely ridiculous. Those are the opinions that are so ambiguous that you wonder why they even bothered with them.

Here’s one on the price of oil by the fine folks over at the S&P. It’s a bit of a head scratcher.

From MarketWatch by Polya Lesova entitled: S&P sees oil prices easing by year-end: Crude may end up at $91, but margin of error is wide, analysts say

“The price of crude oil is expected to stabilize or dip by the end of the year as the U.S. economy struggles through a recession, even if that contraction is mild and short, Standard & Poor’s analysts said on Thursday.

The analysts said oil is likely to be trading around $91 a barrel by the end of the year, but cautioned that prices could fluctuate around $50 on either side of that mark.

“I don’t think it [the U.S. recession] will have as much downward impact on commodity prices because [a lot of] commodities demand comes from outside the U.S.,” said David Wyss, chief economist at Standard & Poor’s, at an oil and gas roundtable in New York City on Thursday.

Overseas demand is frequently given as a reason by forecasters who anticipate oil prices will keep rising. On Tuesday, crude soared to record high of $119.90 a barrel, though on Thursday oil fell sharply.

Roundtable analysts downplayed one of the frequently cited technical reasons for the recent rise: the fall in the U.S. dollar.

Wyss said that just 10% to 20% of the rise in oil can be attributed to weakness in the dollar.

Oil, which is priced in U.S. dollars, has been rising even when priced in other currencies.

Instead, analysts said, the oil market remains vulnerable to basic supply and demand drivers.”


Hmmm. Now let’s think about that one for a moment.

So oil remains vulnerable to basic supply and demand huh? And it could range in price from $41 to $141 you claim?

Well gee thanks. You can come in off that limb now.

Meanwhile, in a separate report issued on the same day, CIBC World Markets said that oil go beyond $200 a barrel in four years and push gasoline prices to as high as $7 a gallon.

That one, by the way, falls under the ugly category.

My call? $95 to $130 sounds about right. 

Have a great weekend.