Are we there yet? The prospects for $100 oil

SAN FRANCISCO (AFX) — When it comes to the prospect of $100 oil prices, it’s still a question of when, not if. Earlier this year, speculation over a spike past $100 a barrel was fed by terrorist activities, severe weather and political and economic uncertainties. In April, Goldman Sachs even warned of a “super-spike” period that could push oil to $105 per barrel. But by late August, around the time when crude-futures prices reached a record level near $71 a barrel, MarketWatch’s editor-in-chief questioned whether Hurricane Katrina had helped mark the peak for oil. And MarketWatch Columnist Tom Kilgore said a technical indicator may be suggesting an end to crude’s uptrend. “The $100 a barrel was never going to be a near-term expectation without a cataclysmic terrorist attack on a significant oil infrastructure,” said Jason Schenker, an economist at Wachovia Corp. Indeed, that price scenario was “always an exaggeration of a low-probability event,” said Michael Lynch, president of Strategic Energy & Economic Research.
When it comes down to it, traders must remember the reason crude reached record highs in late August. “There was a massive natural disaster that caused supply lines to shut down and we’re still seeing the impact of,” said Schenker. So “it would take something significantly greater than Katrina, Rita and Wilma combined” to get prices to $100.

Crude prices are down about 18% from their record high in Katrina’s wake

Even so, some analysts refuse to relinquish that triple-digit price, mainly because the world is depleting its oil reserves and there’s never a shortage of price-supporting events.

“What ever happened to $100 crude? It just got postponed,” said Agbeli Ameko, a managing partner at First Enercast Financial. “That is, at least until the next hurricane season or some geopolitical bombshell. In this ‘peak-oil’ and ‘terror-premium’ environment, the market will remain in reach of the $100 barrier,” he said.

FXStreet.com