UBS Hikes Crude Oil Forecasts

UBS has increased its forecasts for WTI crude from US$51 per barrel to US$58.25 for 2009 and from US$58 to US$70 for 2010. Second quarter prices came in roughly US$10 higher than its forecast.

UBS expects oil will trade in the middle to upper part of the US$50 to US$75 range on declining inventories in the second half of this year and into next. It also sees a weakening U.S. dollar in 2010-2011 and the market’s apparent willingness for greater risk appetite driving crude prices.

UBS has maintained is US$75 long-term normalized price, “which remains predicated on the price required to provide sufficient incentive towards non-OPEC production growth to balance markets over the long term,” its analysts said in a report.

They continue to expect prices over the next two-and-a-half years to average below equilibrium levels given weak fundamentals: poor demand, bloated inventories and unusually high surplus OPEC capacity.

Despite significant increases to 2009/2010 cash flow and earnings estimates, UBS has made minor cuts to its price targets in order to reflect a significant increase to its normalized USD/CAD exchange rate. It moves from US80.5¢ with US$76 per barrel oil to US87.5¢ with the same oil price.

In the large cap space, its tops picks are Petro-Canada (PCZ) / Suncor Energy Inc. (SU) and Talisman Energy Inc. (TLM). Among energy trusts and mid-cap names, UBS prefers Petrobank Energy and Resources Ltd. (PBEGF.PK), Crescent Point Energy Corp. (CPGCF.PK) and Baytex Energy Trust (BTE).

Comments

[Ferdinand E...:]

$75/b for oil in a meltdown or partial meltdown. That doesn't sound right to me. Of course it apparently sounded right to the people at the G8 summit, however most of them were not only ignorant but also full of that wonderful Italian vino.

Jul 10 10:51 AM

[nana1:]

I downgrade oil price to $35.00 This is based on total production cost about $30.00 per AIE statistical data.
The same for gold, gold should fall to $ 450.00 because production cost are $200-$400. History repeats itself, always.
The one who has higher cost will loose in USA -Gulf of Mexico , the one who has lower cost like Middle East will have very large profit. MIddle East production cost is only less than $10.00. Think always about the cost and add to it maximum 30% or less for profit and non-production cost.
Do not listen to speculators or interested parties, they always want price to go up at your expense.

Jul 14 03:48 PM