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CIBC: Oil to climb to $84 next year
The Associated Press
Oil will likely climb to $84 a barrel next year, eventually rising to $100 per barrel by the end of 2007, CIBC World Markets predicted Sept. 8.
The average West Texas Intermediate oil prices will be affected by both supply and demand factors over the next few years, said the study by chief economist Jeff Rubin.
The study, which predicts oil will average $93 per barrel in 2007, said prices are “expected to reach or exceed $100 per barrel by the fourth quarter of that year.”
“The devastation to both oil fields and oil industry infrastructure from hurricane Katrina will not only impact current oil production but future production as well,” CIBC World Markets said in a release.
“The study expects that planned expansion of production in the Gulf of Mexico over the next two years is likely to be halved, cutting off nearly 300,000 barrels per day of potential future supply. The setback to planned expansion of Gulf of Mexico capacity comes on the heels of stagnant production in Russia and tapped out capacity in OPEC.” Demand less sensitive to price than thought The study noted that world oil demand is less price sensitive than was thought, “requiring larger than originally anticipated price increases to rein in future demand growth.” It linked a declining sensitivity in world oil demand to price and to the growing importance of energy consumption in China.
“While the full economic impact of expected oil price increases is difficult to gauge, at a minimum, the economic drag from higher energy prices should quickly cap rising short-term interest rates in both Canada and the United States,” Rubin said.
“Apart from possibly one more rate hike on either side of the border, we are likely at a cyclical peak in short-term interest rates thanks to soaring oil prices.”
CIBC World Markets is the wholesale banking arm of CIBC providing credit and capital markets products, investment banking and merchant banking.
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