Talisman CEO Sees Oil Prices Staying Above $90/Bbl Next 2 Yrs
07:37 EDT Monday, June 23, 2008
(This article was originally published Friday)
CALGARY (Dow Jones)--Crude oil prices are likely to stay above $90 a barrel in the next couple of years as resource-rich nations continue to squeeze out foreign investment, Talisman Energy Inc.'s (TLM) chief executive said Friday.
Speaking at an event in Calgary, John Manzoni added that the oil market was clearly "in a structural fix" with supply growth lagging demand, rather than speculative activity fueling the high prices.
"It's going to stay structurally high for a year or two," Manzoni said, adding "certainly not at $140 a barrel...but at $90 plus."
The back end of the oil price curve reflects the marginal cost of supply, he said, noting that oil prices flattened out at the $70/bbl level a few years ago as it became more economical to bring on higher-cost crude, such as from Alberta's vast oil sands.
But the multibillion-dollar revenues generated by oil companies as prices surged past $100/bbl have prompted a number of oil-rich nations to renegotiate contract terms, sometimes forcibly, as in Venezuela and Russia. Some Canadian provinces such as Alberta have also raised their share of energy revenues.
"It's not money in this world that's short, it's opportunity," Manzoni said. " It's the opportunities to invest that money which are the limiting factors."
He added that natural gas prices were also likely to remain above $8-$9/mmBtu, noting that half of new U.S. supplies were coming from high-cost tight gas plays.
Alternative sources are still "another technology cycle and a half" away, and only a major slowdown in demand will curb the oil price rally, Manzoni said.
Oil producers such as the Organization of Petroleum Exporting Countries have consistently maintained that speculative fund money and the weakening dollar have powered the surge in oil prices, rather than an imbalance in supply and demand.
While speculation and currency fluctuations are issues, they aren't driving the long-term oil price, Manzoni said. He noted that the amount of money piling into longer-dated oil contracts has increased "dramatically,"but it's not all speculative fund money that's investing for the short term.
-By Hyun Young Lee, Dow Jones Newswires; 613-237-0669; hyunyoung.lee@ dowjones.com (END) Dow Jones Newswires
06-23-08 0736ET
Copyright (c) 2008 Dow Jones & Company, Inc