Some See Oil At $150 a Barrel This Year

A growing number of oil-market watchers say voters riled by soaring fuel costs may face far worse this summer, as factors ranging from unrest in Nigeria to slumping production in Russia could shove benchmark oil prices over $150 a barrel.

…”It’s not that the genie is out of the bottle — it’s that 100 genies are out of the bottle,” said Daniel Yergin, chairman of Cambridge Energy Research Associates. Normally known for optimistic forecasts of lowering oil prices, Mr. Yergin’s firm now says the price could rise to $150 a barrel this year.


The world’s diminished spare production capacity remains the strongest single catalyst for high prices, Mr. Yergin says. The world’s safety cushion — the amount of readily available oil that could be pumped in a moment of crisis — is now around two million barrels a day, according to most estimates. That’s just 2.3% of daily demand, and nearly all of the safety cushion is in one country, Saudi Arabia. Everyone else is pretty much pumping all they can, which makes the world vulnerable to political or other shocks.

The oil market has become all the more skittish amid a raft of gloomy news from big oil producers. Indonesia, a longtime member of the Organization of Petroleum Exporting Countries, says it may pull out of the cartel next year as its production continues to fall to less than half its peak of 1.7 million barrels a day in the early 1990s. Indonesia has been a net oil importer since 2004.

In Nigeria, a series of militant attacks on energy infrastructure and an oil workers’ strike that ended last week have added to the country’s reputation as one of the most unreliable oil suppliers. Sabotage has shut down at least one quarter of Nigeria’s effective pumping capacity of 2.5 million barrels a day.

The world oil market has also learned to be disappointed with non-OPEC producers, as underinvestment and aging oil fields in places such as Mexico and Russia have crimped crude production.

Non-OPEC production may grow this year by about 1%, below many analysts’ expectations. The Paris-based International Energy Agency, funded by consuming nations, in April again cut its 2008 non-OPEC supply outlook for the year, this time by 85,000 barrels a day to 50.5 million barrels a day.

OPEC has kept its production target unchanged for eight months and has rebuffed calls for more supply even though crude prices have increased 54% since the 13-nation group last raised its production target at a meeting in September. Saudi Arabia, the cartel’s largest supplier by far, has sent strong signals recently that it doesn’t see adding additional production capacity beyond 2009.

Wall St. Journal