Lehman says oil prices have peaked

Oil prices have peaked for the next few years amid signs tight supply and demand fundamentals are loosening, Lehman Brothers said on Friday.

“Barring a physical disruption that may temporarily spike prices, we judge that oil prices have peaked for the next few years,” Lehman said in a research note.
In our view, the recent correction in oil prices was overdue and softness awaits in the next 12 months.”

Oil prices hit a record over $147 on July 11 after surging demand from emerging markets like China ignited a six year rally that sent prices up sevenfold at their peak.

Demand in the United States and other consumer nations has faltered under record fuel prices, helping to push oil down more than 20 percent from the all-time high.

In addition, the end of precautionary inventory building ahead of the Olympics by China and rising exports by OPEC kingpin Saudi Arabia are also weighing on prices, Lehman said.

“We judge that fundamental looseness is already emerging,” the investment bank said. “Saudi Arabia again appears to be playing the role of swing supplier, pumping 500,000 barrels per day more than three months ago.”

Reuters