Bank of Montreal forecasts oil prices will tumble over next two years

TORONTO (CP) – World oil prices should fall from current levels around $50 US a barrel to the $33 to $38 range in 2005 and even lower in 2006, a Bank of Montreal report says.

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TORONTO (CP) – World oil prices should fall from current levels around $50 US a barrel to the $33 to $38 range in 2005 and even lower in 2006, a Bank of Montreal report says.

“Global production of oil has more than kept pace with demand, allowing for a rebuild of inventories from very low levels at the beginning of the year,” Earl Sweet, assistant chief economist at BMO Financial Group, said in the report released Friday.

Current high prices reflect strong growth in global consumption – especially in China – and several risks to supply, he said.

But a steep increase in production, led by gains in the former Soviet Union, Africa, and OPEC (news – web sites), has resulted in a 4.3 per cent rise in supply – a full percentage point above the increase in global demand.

That should result in a sharp drop in consumer energy products next year, including gasoline, Sweet says.

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