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Forecasts for Crude Oil Rise to $105 on New Trading High
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Some analysts said that oil prices are sensitive to minor political disturbances because there is little excess production capacity outside Saudi Arabia. Last month, Turkey's military incursion into northern Iraq roiled some traders. Yesterday the oil exporting nations of Ecuador and Venezuela massed troops on the border of Colombia in defense of Colombian anti-government guerrillas.
"As long as supply and demand are still relatively tightly balanced and there is not a lot of spare production or refinery capacity around, the market is going to be easily spooked," said Sieminski.
But Sieminski and other analysts noted that investment flows from stock and bond markets were big relative to commodity markets and were more important than political jitters.
At Deutsche Bank in New York, where there were no investment funds for commodities two years ago, the amount of money invested in commodity funds has climbed to $8 billion, Sieminski said. Energy typically makes up 60 to 70 percent of those commodity funds, he added.
Adam Robinson, an analyst with Lehman Brothers, noted that price movements across a wide range of commodities were virtually identical even though political factors are different for each. He also noted that the price of oil for delivery several months from now had risen about $20 a barrel recently, long after fleeting political tensions would have passed.
The price of crude oil for April delivery set a new high even after adjusting for inflation. There are different ways to calculate the inflation-adjusted price, but yesterday crude oil broke even the highest. All methods say that the previous high point came in 1980 or 1981, soon after war broke out between Iraq and Iran.
According to the Energy Information Administration, the previous peak was $94.86 a barrel in January 1981. It uses the consumer price index and the monthly average U.S. refiner acquisition cost of imported crude oil.
Cambridge Energy says the previous inflation-adjusted peak was $103.59 a barrel in April 1980. It uses the average posted price that U.S. producers said they would charge for crude oil.
Reuters said yesterday that the previous peak was $103.76 a barrel.
