2009 Oil Forecast Down to $50 - TD Newcrest

Crude oil was up Thursday on more news that OPEC is set to cut world supply, but according to TD Newcrest analyst Roger Serin, the near term outlook for oil is still pretty bleak.

Mr. Serin said in a note to clients:

Recent data shows crude oil demand has fallen precipitously and the International Energy Agency now anticipates further erosion as the worldwide economy remains under pressure.

We do not expect any sustained rally in crude oil prices until mid-late 2009, although OPEC meets on December 17th and speculation of a meaningful cut, if true, may help crude oil prices.

He revised his 2009 WTI crude oil forecast down from $75 per barrel to $50/bbl. His Nymex natural gas estimate for next year drops from $7.50/mcf to $6.50/mcf. The analyst noted that WTI prices will likely strengthen in late 2009.

Based on his new forecast, Mr. Serin said energy trusts are under greater pressure to meet their current distribution obligations.

"We now forecast that more trusts will lower distributions and these distribution cuts will be deeper," he wrote, adding his thesis is supported by recent cuts from ARC Enegy Trust (AETUF.PK) and Baytex Energy Trust (BTE).

Regarding the international explorer & producer space, Mr. Serin said cash flow and earnings estimates are affected negatively by his oil and natural gas decrease, but those companies with positive cash flow and production can weather the storm and should benefit first from the eventual increase in prices.

He also wrote that E&Ps with strong balance sheets may find acquisition opportunities at great prices.

Comments

[Loup-Garou:]

Patience will likely pay off. Roger Conrad likes this stock--of course he is a great bull on oil. It is a fairly large operation. I own it and am happy with it so far.

2008 Dec 15 06:04 PM