Where’s that Seasonal Decline in Oil Prices? New Raymond James Report says ‘Forgetaboutit’
Posted: October 9, 2007
If you’re looking for crude oil prices to come down between now and the end of November just as they have each of the last three years, well, as Tony Soprano might say, you can “fuhgeddaboudit.”
There’ll be no price drop this year, according to a new report from the brokerage firm Raymond James & Associates, which has just raised its price estimate for the 2007 fourth quarter from $70 to $80 a barrel, which is approximately where prices are currently. “The global oil outlook looks as bullish as we have seen in many years,” Raymond James said in the report, which also made an initial 2009 price forecast of $85 a barrel – a figure which, if history is any guide, may well be raised as time goes on.
For investors, the significance of the new Raymond James report is that, not only should shares of major oil companies further rise as they generally do when the price of the commodity is rising, but shares of alternative energy companies may rise, too, as pressure mounts on government and business to improve energy efficiency and find alternatives to oil.
Compared with similar reports by other brokerage firms, the Raymond James energy-stat-of-the-week report for Oct. 1 looked farther into both the past and the future of oil, drawing a picture of a world about to enter an era even many oil traders have not seen.
For 40 years the world has had spare oil production capacity, or in industry jargon, an “oil bubble.” But the combination of a decade of sharply higher demand and disappointing non-OPEC supply growth has all but eliminated that bubble, according to Raymond James. Now, with rising prices still not causing lower demand, and with many of the world’s mature oilfields continuing to show precipitous declines that are offsetting new discoveries, supply constraints are likely to persist, with prices likely to rise until they finally serve to diminish demand.
Raymond James suggested that oil traders generally aren’t yet aware of the new era that oil has entered. In addition, traders continue to overestimate non-OPEC’s ability to raise production. Once traders see that they are wrong, this likely will cause prices to rise even higher, the report inferred.
