Commodities | Jan 19 2011
By Chris Shaw
Oil prices are currently at comparable levels to those seen early in 2008, the price of a barrel of sweet crude climbing towards the US$100 per barrel mark.
But unlike in 2008, when prices rose in subsequent months to around US$137 per barrel, Barclays Capital doesn't see prices climbing significantly higher in the next few months.
In the view of Barclays, any sustained move beyond the US$100 per barrel mark this year is likely to bring about a credible change in OPEC's stance, one that should bring down average prices.
Different market conditions to 2008 should also help keep prices in check, as Saudi production remains about one million barrels per day below early 2008 levels. According to Barclays, this means Saudi production has enough flexibility to manage any undesirable price moves by managing physical oil balances.
As well, Barclays sees the market in general as having greater confidence in the existence of this production flexibility, as thanks to an increase in capacity in recent years, OPEC production overall is estimates to be almost 2.5 million barrels per day below its mid-2008 peak.
In addition, Barclays expects the current overall economic and geopolitical conditions will see a Saudi reaction earlier in the price cycle this time around. This leads the analysts to suggest oil prices are unlikely to trade above US$100 per barrel for any prolonged period of time. At least, not yet.
