Financial analysts have increased their estimated oil prices for the first half of the 1990S.
Salomon Bros. Inc. and Morgan Stanley & Co., both of New York, boosted oil price expectations but disagreed on what will happen to gas prices.
Salomon Bros. issued a new 5 year oil and gas price forecast with revised oil and gas price estimates significantly higher than in its previous forecasts.
It forecast average prices for West Texas intermediate crude at $28.50/bbl in 1994 and $31.50/bbl in 1995. The previous forecast was for $23/bbl in 1994.
Salomon Bros. expects Louisiana spot natural gas prices to average $3.75/Mcf in 1994 and $4.50/Mcf in 1995. The previous forecast was for $2.65/Mcf in 1994.
OIL PRICE BOOST
The price of U.S. crude will take off because of supply constraints, said Bernard J. Picchi and Richard D. Soultanian of Salomon Bros.
U.S. production will fall faster than it originally forecast because of virtual elimination of offshore California oil projects from the country's inventory of viable projects for at least the next few years.
U.K. North Sea oil production will not snap back as readily from 1989 production problems as originally expected, and production difficulties likely will cause further drops in Soviet Union exports for several years.
The Organization of Petroleum Exporting Countries' capacity utilization rate in 1995 may be 90%, up from 79% today, leaving little room for supply interruptions without dramatically jolting world oil prices, Salomon Bros. said.
MORGAN STANLEY OUTLOOK
Morgan Stanley's Paul Mlotok raised his oil price forecast for 1990 to $21/bbl from $20/bbl and for 1994 to $28/bbl from $25/bbl.
He trimmed his U.S. gas price expectations.
The latest forecast calls for 1990 natural gas prices to be only 5% higher than 1989 prices rather than 10% higher, mainly because the warm weather in January and February triggered early price declines.
The outlook for 1991 through 1994 remains at a growth of 10%/year.
Morgan Stanley also assumes a 30% decrease in chemical earnings this year compared with 1989, vs. a previous outlook for a 25% decrease.
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