Thursday, January 13, 2011

Will Oil Prices Exceed $100 in 2011? (Video, Chart) *China 40% of new demand*


Over 40% of incremental oil consumption is coming from China

Will Oil Prices Exceed $100 in 2011?

In the video below, Peter Tertzakian, chief energy economist at ARC Financial, believes that while oil may exceed $100 near term, oil will not rise dramatically to $120, $140, $150 as was the case in 2007 and 2008. He believes the 2011 trading range will mostly be $80 - $100. Darryl Guppy, a technical analyst, also sees $100 as a psychological resistance level and also $98 as strong resistance just below. However, Guppy feels if a breakout occurs above $100, oil may rise dramatically as it did in February 2008 when the $98, then $100, resistance levels were gained.

Peter Tertzakian says there is a limit to oil prices, the fundamentals have changed since the high oil prices of 2007 and 2008, oil will surpass $100 in the near future, but $80 - $100 is the most likely trading range for 2011. "The bulk of energy growth, and oil demand growth, is coming from China. Back in 2007 and 2008, energy growth was coming from all parts of the world." Tertzakian notes most of the oil demand growth is coming from developing countries of which 40% is from China. "Yet there is a limit to oil demand in that fundamental change takes place when the oil price gets too high."

There is a limit to oil prices now. Tertzakian says, "Society has a lot more options in finding substitutes (for oil)", than even 3 years ago. "Plus you can't diminish the supply side of the equation. New technologies are being used to liberate large quantities of natural gas, hydraulic fracturing, horizontal drilling, are also being applied to the oil side." He also believes domestic (USA) production of oil is going to rise after "30 or 40 years of it being in decline".

"If we do see a bump up in oil supply and oil demand mitigation, we are going to see the edge taken off the oil price wanting to go higher".  Tertzakian notes $100 is a psychological price and barrier for oil as is $4.00 - $4.50 gasoline. "We really have to be watching the other side of the world, China, in particular their energy policies. China is putting together some pretty aggressive policies to try and diversify their energy 'diet'.

CNBC "Oil Prices in 2011" Peter Tertzakian, chief energy economist at ARC Financial, tells CNBC oil prices will continue to trade in the $80 to $100 range in 2011.

Oil Is Bullish, En Route to $98 Darryl Guppy, a technical analyst, believes oil is going to at least $98 in 2011, if not dramatically higher, if the $100 psychological barrier is broken through.

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Oil is Bullish, En Route to $98 (CNBC)

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