Expert Prediction of Oil Shortage Boosts Outlook for Imperial, Cimarex

A source from within Saudi Arabia has come public with a floor price for oil of $100 a barrel in 2010, lending strength to the outlook for our buy recommendations from Imperial Oil (IMO) to Cimarex Energy (XEC). Ironically, as long ago as August 21, 2005, the New York Times reported that Mr. Sadad al Husseini, who arguably “knows more about [oil] than anyone else”, delivered a clear message “the world is heading for an oil shortage”.

It was too soon in 2005 for the political leadership in producing and consuming countries to recognize that reality. Now that oil price continues to rise and global oil production has been flat for three years, the Desert Deep Throat was apparently allowed by his country, Saudi Arabia, to present his analysis to an industry forum in London last week. The “chilling assessment” was reported by the Wall Street Journal on October 31.

Explaining that Middle East reserves are inflated and that production will likely not increase from current levels, Mr. Husseini thought the $100 floor price would be necessary to limit demand to supply. Markets are reflecting those prospects quickly and our vision of $150 in 2010 may be getting closer to reality, albeit on a volatile path.

Originally published on November 6, 2007.