Let's hope Steve Forbes' bold statement holds true....
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/08/31/cnoil31.xml&menuId=242&sSheet=/portal/2005/08/31/ixportal.html
Forbes predicts oil will drop to $35 within a year
Steve Forbes, the billionaire business publisher, predicted that the oil bubble will burst inside a year and the price will plunge, as the impact of Hurricane Katrina sent the price of oil soaring to new record levels.
He spoke as Katrina shut down almost all the flow from the Gulf of Mexico, which provides over a quarter of the United States' oil. "I'll make a bold prediction. In 12 months you're going to see oil down to $35 to $40 a barrel," he said. "It is a huge bubble, I don't know what's going to pop it but eventually it will pop - you cannot go against supply and demand, you cannot go against the fundamentals forever."
Oil production in the gulf was down by 92pc, or 1.4m barrels, and gas production fell by 83pc as the hurricane threatened severe damage to the installations in the region. In response, the price of Brent in London spiked $3.22 a barrel to a record $68.09 while in New York oil was up $2.65 a barrel to $69.25 during late trading.
Analysts said it was unclear how much damage the hurricane had done to the 4,000 platforms and 33,000 miles of underwater pipelines in the gulf since few companies have been able to send helicopters over the region.
Shell said an aerial inspection of its Mars platform indicated some damage to its upper deck. Mars produces around 147,000 barrels of oil and 157m cubic feet of gas a day - 15pc of the Gulf of Mexico's overall production.
A spokesman for BP said there had not been any damage at its Mad Dog, Holstein or NaKika platforms but all of its 350,000 barrels a day in the region had been shut in. The US coast guard said seven rigs were adrift.
The Louisiana Offshore oil port, the largest import terminal in the US, has been shut, as have several refineries. The St Charles refinery, owned by Valero, is under 3ft of water.
The cut in the oil supply prompted the US government to promise that any shortfall would be made up from the stockpiles of the strategic petroleum reserve, which contains around 700m barrels. Last night one West Coast refiner applied for emergency supplies.
Mr Forbes said the whole concept of the strategic reserve was pushing prices higher. "The speculators know now that no matter what happens to the price of oil Uncle Sam is there buying almost every day," he said. "Stop the buying and in fact throw some of that oil on the open market, boy that would throw it in turmoil and send the price down."
The oil market has become a target for investors, since the returns have been significantly higher than those from the stock or bond markets in the past couple of years. Fundamentally there is enough oil to go around.
Stockpiles are full and Saudi Arabia has promised to step up production to 11m barrels a day.
"This is sheer bubble speculation. I'll be blunt, there's hardly a hedge fund in North America that hasn't speculated on oil futures," said Mr Forbes. He added that when prices did fall, the impact would make the dotcom collapse "look like a picnic".
Dominic Bryant, an analyst at BNP Paribas, suggested that increasing oil production could actually fuel price rises, since there would be less spare capacity available to meet any future shocks. He said prices could keep rising if Katrina turned out to be as destructive as Hurricane Ivan. The damage Ivan did to the region's underwater pipelines took six months to mend and added $10 to the oil price in the month following the storm.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/08/31/cnoil31.xml&menuId=242&sSheet=/portal/2005/08/31/ixportal.html
Forbes predicts oil will drop to $35 within a year
Steve Forbes, the billionaire business publisher, predicted that the oil bubble will burst inside a year and the price will plunge, as the impact of Hurricane Katrina sent the price of oil soaring to new record levels.
He spoke as Katrina shut down almost all the flow from the Gulf of Mexico, which provides over a quarter of the United States' oil. "I'll make a bold prediction. In 12 months you're going to see oil down to $35 to $40 a barrel," he said. "It is a huge bubble, I don't know what's going to pop it but eventually it will pop - you cannot go against supply and demand, you cannot go against the fundamentals forever."
Oil production in the gulf was down by 92pc, or 1.4m barrels, and gas production fell by 83pc as the hurricane threatened severe damage to the installations in the region. In response, the price of Brent in London spiked $3.22 a barrel to a record $68.09 while in New York oil was up $2.65 a barrel to $69.25 during late trading.
Analysts said it was unclear how much damage the hurricane had done to the 4,000 platforms and 33,000 miles of underwater pipelines in the gulf since few companies have been able to send helicopters over the region.
Shell said an aerial inspection of its Mars platform indicated some damage to its upper deck. Mars produces around 147,000 barrels of oil and 157m cubic feet of gas a day - 15pc of the Gulf of Mexico's overall production.
A spokesman for BP said there had not been any damage at its Mad Dog, Holstein or NaKika platforms but all of its 350,000 barrels a day in the region had been shut in. The US coast guard said seven rigs were adrift.
The Louisiana Offshore oil port, the largest import terminal in the US, has been shut, as have several refineries. The St Charles refinery, owned by Valero, is under 3ft of water.
The cut in the oil supply prompted the US government to promise that any shortfall would be made up from the stockpiles of the strategic petroleum reserve, which contains around 700m barrels. Last night one West Coast refiner applied for emergency supplies.
Mr Forbes said the whole concept of the strategic reserve was pushing prices higher. "The speculators know now that no matter what happens to the price of oil Uncle Sam is there buying almost every day," he said. "Stop the buying and in fact throw some of that oil on the open market, boy that would throw it in turmoil and send the price down."
The oil market has become a target for investors, since the returns have been significantly higher than those from the stock or bond markets in the past couple of years. Fundamentally there is enough oil to go around.
Stockpiles are full and Saudi Arabia has promised to step up production to 11m barrels a day.
"This is sheer bubble speculation. I'll be blunt, there's hardly a hedge fund in North America that hasn't speculated on oil futures," said Mr Forbes. He added that when prices did fall, the impact would make the dotcom collapse "look like a picnic".
Dominic Bryant, an analyst at BNP Paribas, suggested that increasing oil production could actually fuel price rises, since there would be less spare capacity available to meet any future shocks. He said prices could keep rising if Katrina turned out to be as destructive as Hurricane Ivan. The damage Ivan did to the region's underwater pipelines took six months to mend and added $10 to the oil price in the month following the storm.
