Web Posted Jan 27 2003 04:20 PM CST Oil markets near 'perfect storm'
Calgary - The international oil markets are approaching what industry analysts are calling the perfect storm.
OPEC countries have been cutting their production, the flow from Venezuela has been interrupted by strikes, cold weather across North America has increased demand and a war with Iraq is nearing, the Canadian Energy Resources Institute heard Monday. Paul Horsnell, head of energy research at JP Morgan in London, expects prices to average $26 a barrel this year, unless there is a war in Iraq and its ability to produce oil is damaged for the long-term.
"You'd have to have a scorched earth policy by Iraq," Horsnell said of the situation it would take to push prices up long-term. "The loss of production capacity, potentially for longer periods, an escalation of the conflict, the Kurdish issue getting out of hand in the north, the Turks involved, the Iranians involved."
Prices were just over $33 a barrel Monday morning, but had dropped 99 cents to $32.29 by market close.
Judith Dwarkin, chief economist at Ross Smith Energy Group in Calgary, is predicting prices will exceed $40 a barrel if war starts.
"The big fear right now is that one little thing more will go wrong, in what's really a tinderbox in terms of pricing situation," Dwarkin said.
She said a big jump in oil prices isn't good for the economy because it results in other products costing more and could help lead to a recession.
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