Oil Seen Hitting US$100 A Barrel This Year

[webfact]

Oil seen hitting $100 a barrel this year

Tee Lin Say

The Star

Will we see oil price exceed US$100 in 2011?

Quite likely, say analysts, as more quantitative easing by the US Government, coupled with strong demand from India and China drive oil prices to the three-digit level again.

In 2010, base metals took centre stage with most industrial commodities and precious metals trading at, or near record highs.

Oil prices, however, were not in the spotlight and had a relatively benign year.

The benchmark West Texas Intermediate (WTI) spot price of crude oil began the year at $81.74 per barrel, slipped to a low of $64.78 in May before climbing to to an intraday high of $91.88 on December 27. (Oil closed at the highest level of $91.63 on December 23). Thus, oil has increased only 13 per cent this year.

Nonetheless, oil prices have jumped almost 30 per cent since September.

Some say the current rally set in around September after the US Federal Reserve embarked on its latest quantitative easing (QE), which triggered a wave of buying in financial markets across the globe.

(QE refers to the Federal Reserve's efforts to jump-start the economy and stave off deflation by buying back $600 billion in Treasury bonds, hence putting more money into the system. Some analysts are watching what happens next, after the current bout of QE stops sometime middle of this year).

However, there are others who believe that oil prices are set globally, and they are rising due to demand from a rising middle class in the emerging markets.

“China has been buying up commodities and resources around the world. It is a matter of time before oil rises again,” said strategist from a foreign brokerage.

Opec's evident reluctance to increase output and the prospect of continued dollar weakness are additional factors in the case for costlier oil in 2011.

In a report by the International Energy Agency, the cold weather had pushed oil prices to two-year highs over $90 per barrel by early last month.

While some may believe there is a fundamental reason for the price uptrend, not all will agree on its benefits.

Oil is, after all, a major input cost.

“If oil prices continue to go up, it will be more than just higher petrol prices that we have to worry about.

“Everything else will get more expensive. This will result in higher consumer price inflation, which could mean interest rates rising again,” said the strategist.

A fund manager, who felt that there was too much pessimism on the US economy, said oil prices could ease as the US dollar started strengthening this year.

“Oil prices may even go lower. China's energy needs might not be as robust as previously thought. A recent crackdown on bank lending could dampen some of its recovery and its appetite for oil,” said the fund manager.

A Hong Kong-based fund manager expected commodity prices to make their next big move sometime this year.

“Already, we are seeing fresh all-time highs in tin, copper, zinc, and other industrial materials. We are seeing this because of the massive infrastructure development in China and India and the global switch to alternative energy,” he said.

The demand for certain commodities cannot be viewed in isolation, the fund manager explained. This is because one type of commodity may be required to produce another type of product .

“In the push for alternative energy, people use water to generate electricity. To create this alternative energy, they still need existing commodities. They still need to build the dam, which requires iron ore and copper, among others.”

“As copper price rises because of increasing demand, the cost of copper equipment will increase. This increases the cost of mining copper, and eventually leads to higher prices for oil and other commodities as well,” explained the fund manager.

-- ANN 2011-01-02

[whybother]

How much is the rise in the price of oil (in $US) affected by the drop in value of the $US?

It would be interesting to see the fluctuation in oil prices in a stronger currency.

[marquess]

How much is the rise in the price of oil (in $US) affected by the drop in value of the $US?

It would be interesting to see the fluctuation in oil prices in a stronger currency.

Doesn't matter whether they go up or down here, the gov is intent on screwing people as hard as they can. 41 Baht per litre of Benzene 91 when it was $147 per barrel but at the pumps it is nearly at that price again.

[whybother]

How much is the rise in the price of oil (in $US) affected by the drop in value of the $US?

It would be interesting to see the fluctuation in oil prices in a stronger currency.

Doesn't matter whether they go up or down here, the gov is intent on screwing people as hard as they can. 41 Baht per litre of Benzene 91 when it was $147 per barrel but at the pumps it is nearly at that price again.

Which is why I talk about prices in different currencies. What was the exchange rate when it was 41 Baht / $US147?

[tigermonkey]

How much is the rise in the price of oil (in $US) affected by the drop in value of the $US?

It would be interesting to see the fluctuation in oil prices in a stronger currency.

Doesn't matter whether they go up or down here, the gov is intent on screwing people as hard as they can. 41 Baht per litre of Benzene 91 when it was $147 per barrel but at the pumps it is nearly at that price again.

Which is why I talk about prices in different currencies. What was the exchange rate when it was 41 Baht / $US147?

The exchange rate in July, 2008 was 33.35 Baht per US dollar -- the current rate is 30.02 Baht per US dollar . You want prices in Thai Baht for spot sweet crude -- 4,914 Baht per barrel in July, 2008 ( when crude was $147 per barrel) -- now it is 2,753 Baht per barrel.

Please don't nit pick the prices -- they are approximate, since oil prices vary all over the world. Yes, someone in Thailand is making a killing on the recent oil prices, translated to the pumps.

Edited January 2, 2011 by tigermonkey

[thrilled]

I'm reading that it could go over $100 A barrel in 2011.

[mkawish]

How much is the rise in the price of oil (in $US) affected by the drop in value of the $US?

It would be interesting to see the fluctuation in oil prices in a stronger currency.

Doesn't matter whether they go up or down here, the gov is intent on screwing people as hard as they can. 41 Baht per litre of Benzene 91 when it was $147 per barrel but at the pumps it is nearly at that price again.

Which is why I talk about prices in different currencies. What was the exchange rate when it was 41 Baht / $US147?

The exchange rate in July, 2008 was 33.35 Baht per US dollar -- the current rate is 30.02 Baht per US dollar . You want prices in Thai Baht for spot sweet crude -- 4,914 Baht per barrel in July, 2008 ( when crude was $147 per barrel) -- now it is 2,753 Baht per barrel.

Please don't nit pick the prices -- they are approximate, since oil prices vary all over the world. Yes, someone in Thailand is making a killing on the recent oil prices, translated to the pumps.

And the oil companies in Thailand continually ask for govt subsidies to keep them 'afloat'--as they claimed.

And PM Apisit and Mr. Korn readily oblige, as if to silently say, we'll scratch your back now, and you'll have to scratch our back whenever 'that time' presents itself. L O L

Edited January 2, 2011 by mkawish

[jaideeguy]

Now will we dig our heads out of the sand and admit that 'peak oil' has topped out??

[Soutpeel]

And the oil companies in Thailand continually ask for govt subsidies to keep them 'afloat'--as they claimed.

And PM Apisit and Mr. Korn readily oblige, as if to silently say, we'll scratch your back now, and you'll have to scratch our back whenever 'that time' presents itself. L O L

Which oil companies in Thailand are asking for govt subsidies ??