Gazprom chief forecasts $85/bbl oil price at yearend
Oil prices should hit $85/bbl by the end of 2009, and if capital investment is not restored, oil prices could rise to $150/bbl within 2-3 years, warned Alexey Miller, chief executive officer of OAO Gazprom at the European Business Congress in Porto Cervo, Italy.
OGJ International Editor
LONDON, June 15 -- Oil prices should hit $85/bbl by the end of 2009, and if capital investment is not restored, oil prices could rise to $150/bbl within 2-3 years, warned Alexey Miller, chief executive officer of OAO Gazprom at the European Business Congress in Porto Cervo, Italy.
Miller said it was encouraging that oil prices had crept to $70/bbl recently, adding that this was “a return to a precrisis trend" and not "not a technical correction or accidental fluctuation.” At this level, it was double the price at yearend 2008, but still far below the peak reached in July 2008.
It was "financial transactions in the oil markets" and not the physical market that caused low oil prices earlier this year, Miller said. He forecasts that investment in exploration and production will decline by more than 20% in 2009. Operators are reluctant to proceed with projects because of the volatility of the market resulting in a reduction in production capacity and oil supplies within 3-5 years.
A year ago Miller said it was possible that oil prices could leap to more than $250/bbl because of the major imbalance between demand and supply of hydrocarbons by 2012.
Miller recommended that there be a radical overhaul in the operation of the oil market. “The problem is that today the price is determined not on the physical oil market, but on a market for financial instruments. As a consequence, the oil price greatly depends not on fundamental factors, not on the real oil demand and supply, but on the activities of speculating investors.”
Miller suggested that long-term oil supply contracts could help exchange trading as it would contain the "impact of speculative capital on the oil price" and help to drive out "economically unjustified intermediaries."
Miller added that producers and consumers need to hold regular dialogue to understand what was happening in energy markets.
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