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Gazprom Predicts Oil Will Reach $250

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Gazprom predicts oil will reach $250
By Carola Hoyos in Deauville and Javier Blas in London
Published: June 10 2008 09:00 | Last updated: June 10 2008 13:22

Gazprom, Russia�??s gas monopoly, on Tuesday predicted oil prices would reach $250 a barrel in 2009.

The striking prediction came as the International Energy Agency, the developed world�??s energy watchdog, warned that record high prices were needed to choke off demand in order to balance the oil market.

It is the IEA�??s most candid admission to date that oil supply is struggling to catch up with Asian demand, and follows the sharp rise in prices last week, which saw crude jump more than $16.24 in less than 36 hours to a record $139.12.

Gazprom�??s prediction came at a strategy presentation in Deauville, where Alexei Miller, chief executive, said: �??Today we are witnessing a very great change for hydrocarbons. The level is very high and we think it [the price of oil] will reach $250 a barrel.�?? A company spokesman specified that Gazprom believed that level would be hit in 2009.

That is substantially higher than forecasts by analysts, who see oil prices in 2009 ranging between $100 and $200.

Biofuel supplies set to surge, says IEA

Biofuels will represent almost 75 per cent of the net increase in non-Opec oil supplies this year, the International Energy Agency said on Tuesday, signalling the fuels�?? growing importance in spite of their impact on world food prices, writes Javier Blas.

The IEA said non-Opec supply would increase this year by a net 455,000 barrels a day, with biofuels contributing 331,000 b/d. Last year biofuels counted for about 45 per cent of the global non-Opec net supply increase.

The IEA said this year�??s growth would take the global supply of biofuels close to 1.4m b/d by December, underpinned by strong growth in US and Brazilian ethanol.

Biofuel production �?? particularly US corn-based ethanol �?? has been strongly criticised as one of the factors driving up food prices. The International Food Policy Research Institute said biofuels explained 30 per cent of the surge in food prices. Washington, however, said biofuels accounted for only about 3 per cent of the increase.

US officials have recently emphasised that biofuels now form a key element of global fuel supplies and warned that removing them from the energy chain would trigger an increase in oil prices.

In its monthly oil market report, the IEA said �??supply growth so far this year has been poor and higher prices are needed to choke off demand to balance the market�??. It added: �??Abnormally high prices are largely explained by fundamentals�??.

Mr Miller agreed with the IEA�??s assessment, saying that speculators were not �??a determining influence�??. He said: �??Competition for resources and their use is growing.�??

The market responded by pushing prices back up after they had fallen below $134 earlier in the session. Nymex July West Texas Intermediate rose 70 cents to $134.95, while ICE July Brent added 53 cents to $134.38.

As expected, the IEA cut slightly its forecast for annual oil demand growth, but surprised the market with a deep reduction in its forecast for supply growth from non-Opec nations, leaving the world more dependent on the producers�?? cartel.

It cut its demand growth forecast further by 80,000 b/d to an annual increase of 800,000 b/d because of record high prices, the slowing US economy and the partial removal of fuel subsidies in some Asian countries.

However, the agency warned that so far, there were �??very few signs of slowing demand in non-OECD countries where economic growth is far more significant than price in determining demand�??.

The cut in the IEA�??s forecast for oil demand growth was overshadowed by a larger cut in forecast supplies. The agency cut its forecast for non-Opec supply growth to just 455,000 b/d, or 225,000 b/d below last month�??s forecast. It expected most of the non-Opec fresh output to be in the form of biofuels, which would account for 72 per cent of the supply increase.

The non-Opec supply growth forecast for 2008 is now below the growth achieved by the group both in 2007 and 2006, in spite of significantly higher oil prices.

The agency also warned that the imbalance between demand and supply forced a counter-seasonal drop in rich countries�?? oil inventories in April. It estimates that stocks fell in April by 8.1m barrels, compared with a traditional increase in April of about 30m barrels.

It warned that current prices could �??impinge upon growth prospects�??, even though the global economy is more resilient to rising oil prices. �??Globally, the high oil price is contributing to inflationary pressures,�?? it said.

The IEA�??s warning echoes comments on Monday by Tony Hayward, chief executive of BP, who said the oil market was not well supplied.

�??In a well functioning market where supply and demand are balanced, prices should be stable. Where prices are high, however, they show that supply is not responding adequately to rising demand … and that is where we find ourselves today,�?? Mr Hayward said.

Francisco Blanch, head of commodities research at Merrill Lynch, said on Tuesday he was raising his forecast for WTI prices in the second half of the year to $121.50, based �??a combination of lower than expected supplies and unrestricted demand. Non-Opec output is really struggling to expand.�??

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It may get that high, but I suspect long before then the bubble will burst. The problem is that it might take a Great Depression to burst the bubble.

R&D for alternative energy will boom, we will finally stop giving money to the Arabs.

[quote]PRCalDude wrote:
R&D for alternative energy will boom, we will finally stop giving money to the Arabs. [/quote]

Exactly what everyone wants but now everyone bitches about it.

Good. Demand-destruction is the only viable option when it comes to oil. It’s too useful and too important to just burn to move from one part of the plant to another.

If gas had cost $12 a gallon for the last 20 years you can be certain that the US would have come up with another way to power cars.

[quote]905Patrick wrote:
Good. Demand-destruction is the only viable option when it comes to oil. It’s too useful and too important to just burn to move from one part of the plant to another.

If gas had cost $12 a gallon for the last 20 years you can be certain that the US would have come up with another way to power cars.[/quote]

Exactly. There are going to be some growing pain as we transition, but so be it. There would have been no way to make the transition if gas was still $ 0.50 a gallon. People would demand gas, and they did.

Now people actually want electric cars when 20 years ago the economics of cheap gas made them silly.

When another oil producer says this, I don’t worry. When a business run by and financing the KGB says this… I’d watch for accidents.

Yawn…I predict oil prices are going to crash big time. The longer it stays up, the harder it will fall.

[quote]Zap Branigan wrote:
905Patrick wrote:
Good. Demand-destruction is the only viable option when it comes to oil. It’s too useful and too important to just burn to move from one part of the plant to another.

If gas had cost $12 a gallon for the last 20 years you can be certain that the US would have come up with another way to power cars.

Exactly. There are going to be some growing pain as we transition, but so be it. There would have been no way to make the transition if gas was still $ 0.50 a gallon. People would demand gas, and they did.

Now people actually want electric cars when 20 years ago the economics of cheap gas made them silly.[/quote]

The growing pain won’t be anywhere near as bad as the jizyah we’re paying right now.

[quote]pat wrote:
Yawn…I predict oil prices are going to crash big time. The longer it stays up, the harder it will fall.[/quote]

I hope you are wrong.

Our species isn’t one to do anything until if absolutely has to and there is no way to deny that there is a finite amount of oil. Sooner or later it’s going to become too expensive to pump out and it would be nice if there as an alternative when it does.

The only way that’ll happen is if the price stays up - even if it’s done deliberately by the oil producing countries.

[quote]PRCalDude wrote:
Zap Branigan wrote:
905Patrick wrote:
Good. Demand-destruction is the only viable option when it comes to oil. It’s too useful and too important to just burn to move from one part of the plant to another.

If gas had cost $12 a gallon for the last 20 years you can be certain that the US would have come up with another way to power cars.

Exactly. There are going to be some growing pain as we transition, but so be it. There would have been no way to make the transition if gas was still $ 0.50 a gallon. People would demand gas, and they did.

Now people actually want electric cars when 20 years ago the economics of cheap gas made them silly.

The growing pain won’t be anywhere near as bad as the jizyah we’re paying right now. [/quote]

We pay billions to fund petro-islam, and we pay hundreds of billions to fight the consequences. Make people pay for the foreign policy consequences of our oil addiction at the pump rather than on April 15 and we’ll see how long it takes for alternative energy to take over.

At first I didn’t believe Bernanke when he said prices weren’t fueled by speculators, but now I’m not so sure.

I really love my propane powered van.

[quote]etaco wrote:
PRCalDude wrote:
Zap Branigan wrote:
905Patrick wrote:
Good. Demand-destruction is the only viable option when it comes to oil. It’s too useful and too important to just burn to move from one part of the plant to another.

If gas had cost $12 a gallon for the last 20 years you can be certain that the US would have come up with another way to power cars.

Exactly. There are going to be some growing pain as we transition, but so be it. There would have been no way to make the transition if gas was still $ 0.50 a gallon. People would demand gas, and they did.

Now people actually want electric cars when 20 years ago the economics of cheap gas made them silly.

The growing pain won’t be anywhere near as bad as the jizyah we’re paying right now.

We pay billions to fund petro-islam, and we pay hundreds of billions to fight the consequences. Make people pay for the foreign policy consequences of our oil addiction at the pump rather than on April 15 and we’ll see how long it takes for alternative energy to take over.[/quote]

A hearty “Amen” to that.

[quote]streamline wrote:
I really love my propane powered van.[/quote]

My wife’s got a natural gas car and she’s only paying $3/gal, while the average here is about $4.70