Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20
AMAZON Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 11th Jan 20
Gold Price Reacting to Global Flash Points - 11th Jan 20
Land Rover Discovery Sport 2020 - What You Need to Know Before Buying - 11th Jan 20
Gold Buying Precarious - 11th Jan 20
The Crazy Stock Market Train to Bull Eternity - 11th Jan 20
Gold Gann Angle Update - 10th Jan 20
Gold In Rally Mode Suggests Commitment of Traders (COT) Data - 10th Jan 20
Disney Could Mount Its Biggest Rally in 2020 - 10th Jan 20
How on Earth Can Gold Decline During the U.S. – Iran Crisis? - 10th Jan 20
Getting Your HR Budget in Line - 10th Jan 20
The Fed Protects Gamblers at the Expense of the Economy - 9th Jan 20
Last Chance to Get Microsoft Windows 10 for FREE! - 9th Jan 20
The Stock Market is the Opiate of the Masses - 9th Jan 20
Is The Energy Sector Setting Up Another Great Entry? - 9th Jan 20
The Fed Is Creating a Monster Bubble - 9th Jan 20
If History Repeats, Video Game Stocks Could Soar 600%+ - 9th Jan 20
What to Know Before Buying a Land Rover Discovery Sport in 2020 - 8th Jan 20
Stock Market Forecast 2020 Trend Analysis - 8th Jan 20
Gold Price at Resistance - 8th Jan 20
The Fed Has Quietly Started QE4 - 8th Jan 20
NASDAQ Set to Fall 1000pts Early 2020, and What it Means for Gold Price - 8th Jan 20
Gold 2020 - Financial Analysts and Major Financial Institutions Outlook - 8th Jan 20
Stock Market Trend Review - 8th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Crude Oil Forecast 2008 to Hit $150 a Barrel

Commodities / Crude Oil Dec 27, 2007 - 01:35 AM GMT

By: Money_and_Markets

Commodities

Best Financial Markets Analysis ArticleSean Brodrick writes: In 2008, we're going to hit an important milestone. In the New Year the world is going to start using oil at a rate of more than 1,000 barrels PER SECOND!

According to the International Energy Agency, global oil demand will average 87.8 million barrels per day (bpd) in 2008, up from 85.7 million bpd in 2007. At 87.8 million bpd, we'll use 1,016 barrels per second — a sonic boom of energy use.


I also think 2008 is going to be the year we finally see triple-digit oil prices. More on that in a moment. First ...

The White House Is Stockpiling Oil! The Question Is, "Why?"

Since August, the Bush administration has been adding 50,000 barrels a day to the Strategic Petroleum Reserve — the nation's emergency oil stockpile — with plans to kick up the pace to 70,000 barrels a day by the end of January.

That U.S. oil tank of last resort now contains 695 million barrels of oil — enough to keep the American economy running for just 56 days if imports were suddenly cut off.

The federal government has been aggressively buying up the world's supply of light sweet crude at a time when crude is selling for over $90 per barrel.

And this binge buying has added as much as 10% to the price of crude, an oil consultant told a Senate panel recently. What's more, in the recent energy bill passed by Congress, President Bush asked — and received — authorization to DOUBLE the size of the Strategic Petroleum Reserve.

My question — what does the Bush administration know that would make them so eager to add to the Strategic Petroleum Reserve when prices are so high? What are they afraid of?

Maybe this chart holds a clue ...

The chart comes from OPEC's December Monthly Oil Market Report . As you can see, crude oil prices dropped in both September 2005 and 2006 (the green and pink lines) along with seasonal demand. But this year that's not happening. As the red circle clearly shows, demand is so strong this year that prices are gushing higher, not lower.

In other words, America is so hooked on oil that higher prices aren't weaning us off our addiction. And this comes at a time when U.S. crude inventories are near their lowest levels in years.

That Means We're More Vulnerable Than Ever to an Interruption of that Oil Supply!

Here are some facts that will keep you awake at night ...

  • America is the world's largest consumer of oil, guzzling more than 7.5 billion barrels per year. We import more than half the oil we use, and that amount is rising.
  • More than 81% of the world's discovered and useable oil reserves come from just 10 countries. And 30% of the world's oil is in three of those countries — Iraq, Kuwait and Saudi Arabia.
  • The world consumes an astonishing 173 billion barrels of oil every 2.4 years. At the same time, we find enough new oil to supply just 3% of that.

So, just to keep prices stable over the next decade, we're going to have to find a couple more fields the size of Ghawar — the biggest oil field in Saudi Arabia ... and the world.

Here Are Three Forces That Will Squeeze Oil Prices Even Higher

Most people know a terrorist attack, a war in the Persian Gulf, or a natural disaster would cause oil prices to rise.

But there are other fundamental forces that will drive the price of oil higher relentlessly, even without a headline-grabbing catastrophe. Let's look at three of them ...

Force #1: A Thirsty World. Despite economic storm clouds on the horizon in the U.S., the global economy is growing at about 4.5% per year. From Brazil to Singapore, business is booming and incomes are rising.

The world's population is trading bicycles for cars, and global oil demand can't keep up. With 14,000 more cars on the road each day, China's oil demand alone is expected to rise at least 5% this year, according to the IEA.

As a result, the International Energy Agency (IEA) projects in its Medium Term Oil Market Report that global oil demand will grow 2.2% a year, on average. By 2012, demand should reach 95.8 million barrels per day (bpd) vs. 85.7 million bpd this year.

At the same time, spare capacity — almost all of which is in Saudi Arabia — is going to vanish like a mirage in the desert.

Even worse, the IEA expects supply increases from non-OPEC oil producers and biofuel producers to start dwindling around 2009.

All that boils down to an ugly picture from the IEA: The world's oil demand growth is going to start outpacing supply growth by 2010!

Force #2: Slipping on the Oil Field Treadmill. The IEA has more gloomy news for us: We're getting between 3% and 4% LESS out of existing oilfields every year. Mature producing areas and many recent deepwater projects are declining at even sharper rates — 15% to 20% annually!

All told, the oil industry needs to add three million bpd of new supply each year just to offset declines in existing fields.

But the oil majors are having trouble finding oil. For example, last year was the first time — EVER — that Exxon didn't replace its reserves through its own drilling, according to Oppenheimer research.

Force #3: Oil Exporting Nations Need More of Their Own Product. The economies of many big oil-exporting countries are growing so fast that their domestic need for energy is sucking up their exports. Experts say the sharp growth, if it continues, means several of the world's most important suppliers may need to start importing oil within a decade.

OPEC member Indonesia has already started importing more oil than it exports ...

Mexico could be doing the same within five years ...

And domestic consumption in Kuwait, Saudi Arabia and Iran is soaring!

According to a report from CIBC World Markets, Russia, Mexico, and OPEC members will cut crude exports by as much as 2.5 million barrels a day by the end of the decade. That is MORE than the current spare capacity in the oil markets.

When OPEC recently opted to freeze output levels it argued that the global market for crude oil was "well-supplied."

But maybe the real reason was that OPEC just didn't have much more to sell.

My Forecast: We Could See Oil Hit $150 a Barrel in 2008

The Energy Information Administration recently told the U.S. Senate that crude should average $85 per barrel in 2008 as fundamentals tighten ...

Goldman Sachs said it could hit $105 ...

But I'm setting my sights a little higher: I think we could see prices spike to $150 a barrel next year!

That kind of a jump might not stick around very long. But as I just showed you, all the fundamentals are in place for oil to hit — and maintain — triple-digit prices next year.

In fact, I believe the only thing that could derail higher prices is a stiff recession in the U.S. And central banks around the world are working hard to prevent that.

Our own Federal Reserve is throwing everything but the kitchen sink at the markets, and the Bank of England and European Central Banks are doing the same.

How You Can Play The 2008 Oil Boom

The oil majors are boosting their exploration spending to an estimated $370 billion next year. That means some undervalued oil exploration and production companies are on the launch pad.

That's precisely why I'll be recommending some of them to my Red-Hot Resources subscribers very soon.

Of course, small-cap, early-stage companies carry both higher risk as well as higher reward.

If you prefer more diversified investments, you can always buy the Energy Select SPDR (XLE) or one of the other energy sector ETFs that are stuffed with larger-cap oil & gas companies.

But whatever you do, get ready to watch oil prices in 2008. I think it's going to be a heck of a show.

Good luck and good trades,

Sean

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

John
31 Dec 07, 13:32
Re: The Question Is, "Why?"

The answer is simple: Bush's global and domestic buddies all get richer the higher oil goes in price.

This ain't particle physics, folks.


Viral
18 Jun 08, 00:28
crude $150

now also u think that it will crude will Hit $150 a Barrel


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules