Crude oil price forecasts boosted by UBS, others

By Tom Stundza -- Purchasing, 5/21/2008 10:54:00 AM

The price of a barrel of West Texas Intermediate (WTI) crude oil will average $115 in 2008 and $120 in 2009, forecasts UBS Securities, whose analysts have dramatically hiked their outlook. The Energy Information Administration’s latest WTI price forecast (which isn’t due for an update until June 10) is $109.50 for 2008 and $103 for 2009.

The daily price for crude oil closed above $129/barrel in New York for the first time after Dallas-based BP Capital hedge-fund manager Boone Pickens told CNBC business television that oil would reach $150 this year because supply isn't keeping up with demand. New York Mercantile Exchange (Nymex) crude now has jumped 35% for the year to date. Then, in Asian trading, oil prices rose above $132/barrel for the first time Wednesday as supply concerns mounted and the dollar weakened,the Associated Press reports.

The UBS analysts don’t anticipate any slide in WTI prices until the middle of 2009 or later, telling clients that they “are abandoning the idea of a near-term collapse in oil prices under the weight of a U.S. recession.” Bloomberg says just about every big global bank has raised its price forecast in recent weeks. The primary factor behind this bullish stance is the global energy market, with real demand growth for several key oil products rising this past winter.
The UBS energy mavens believe that even if growth in demand slows in North America, demand-growth strength in other regions and constrained world supplies will keep prices elevated in all key markets for some months to come.

Meanwhile, UBS also boosted its annualized natural gas price to $9/1,000 cubic feet (mcf) from $7.25 predicted earlier. The bank’s analysts expect natural gas will be more volatile because of high North America demand trends, soaring coal prices and likely increases in the cost of electricity generation and increased competition for LNG from the Asian Pacific region. In fact, the UBS analysts see daily natural gas prices ranging ahead from $7 to $14.