Oil price bubble may be set to burst – analysts

A 3 per cent drop in crude oil prices yesterday could be the first sign that energy’s bubble is losing air in recognition of swelling US inventories, analysts say.
While some analysts insist that high oil prices are here to stay, many believe energy futures reached the point the stock market did in early 2000 when the technology bubble burst because investors had ignored overblown stock prices in relation to company profits.
“The sky is falling,” said Tim Evans, analyst with IFR Energy Services. “Sell sky.”

Reuters via nzherald.co.nz
09.04.05
NEW YORK – A 3 per cent drop in crude oil prices yesterday could be the first sign that energy’s bubble is losing air in recognition of swelling US inventories, analysts say.
While some analysts insist that high oil prices are here to stay, many believe energy futures reached the point the stock market did in early 2000 when the technology bubble burst because investors had ignored overblown stock prices in relation to company profits.
“The sky is falling,” said Tim Evans, analyst with IFR Energy Services. “Sell sky.”
Spiking oil prices have attracted enough imports to the US shores in recent months to build stockpile levels to their highest since 2002, when oil prices were around US$20 ($28.40) a barrel, to counter lingering fears of an imminent global supply shortage.
Oil prices have gone up 25 per cent since the year began and are 50 per cent higher than a year ago.
Many analysts have predicted an end to the frenzy, which last week brought oil to a record near US$60 a barrel. But others say high prices for oil could be here for the long term.
“I don’t think we’re going to see any significant or meaningful change any time soon,” said Fadel Gheit, of Oppenheimer & Co.
“Oil prices will hang at their current levels or even go higher.”
Fears of inability to quench the thirst of growing Chinese demand and the potential for terror attacks in oil-producing countries have kept crude prices higher than the underlying supply-and-demand factors.
“A bubble is an unsustainable price situation,” Gheit said.
“That doesn’t mean the bubble has to disappear. A bubble can last for a very long time. It can last 20 to 30 years.”
– REUTERS

Reuters via nzherald.co.nz