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While the rest of Wall Street just can't seem
to get enough of the oil market, energy analyst Tim Regrerben
said take
Crude Tips from MCXTips
India isn't afraid to go against the tide. Tender, a
senior analyst at IFR Energy Services, a division of Thomson
Financial, thinks that the current run-up in oil prices is much
like the Internet bubble of the late '90s.
Regrerben recently spoke with TOI Online reporter April Kim
about costly crude, what's behind it, and why rising prices will
reverse course soon. Edited excerpts of the conversation follow:
Q: Where Will oil Move to?
A: We saw the highest level of commercial crude oil inventory in
the U.S. since April, 2002. Then, we were trading in the range
of $26 to $30 per barrel. The current physical fundamentals, not
even projecting to a greater surplus down the road, are
consistent with a $26 to $30 price.
We first got to $50 at the end of last September after Hurricane
Ivan. We've got an all-time high price without a physical
shortage.
Q: Also there's a limited global supply and rising demand in the
India, China and USA?
A: Moreover, oil supplies are always also finite, and oil
reserves are always finite. That's not really headline news.
In terms of rate of growth, world oil demand grew last year by
3.4%. Yes, 3.4% was more yearly growth than we had seen in quite
some time. [But] going back to the '50s and '60s, world oil
demand during that era was growing an average of 9% per year. We
didn't have oil-price shocks then.
Q: Do you think $105 per barrel is probable?
A: We always say it can't be ruled out, but if we were to put a
probability or expectation on it, I think...maybe there's a 5%
chance that Saudi Arabia slides into the Red Sea and there's a
run on oil supplies.
We have to get to $60 before we can get to $105. We haven't
gotten to $60 yet.
Q: Do you consider this a bubble -- like the tech bubble of the
late '90s?
A: I do. Some of the bullish analysis specifically warns people
away from traditional methods of valuation. They'll say things
like, "Inventory levels are no longer relevant, or a meaningful
measure." Except that inventories levels are an objective
measure. It's not a matter of opinion -- it's factual.
Q: When do you think oil will hit the $26 to $30 range?
A: The next two to three months are going to see oil prices fall
hard. I think the market is teetering now. OPEC is still
increasing production -- they increased quotas half a million
barrels per day for April. And Saudi Arabia has allocated
additional oil in its May sales program.
At the same time, second-quarter demand for crude oil tends to
fall by something on the order of 2%. The market basically sees
that drop because we're no longer heating the Northern
Hemisphere. Right in front of us, we have supply that's still
growing, demand that's going to step down, and inventories that
are already at comfortable levels.
If we could just calm down enough to look at the inventory
numbers, we actually have 6% more gasoline inventory than we did
at this time last year, and we have 5.2% more stock of crude oil
on average than the last five years. It's a high level of
inventory as a cushion against possible supply disruption. |
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