Newspaper article THE JOURNAL RECORD

Analysts Predict Oil May Fall to $15

Newspaper article THE JOURNAL RECORD

Analysts Predict Oil May Fall to $15

Article excerpt

NEW YORK (AP) _ Ask a petroleum expert to peer into the crystal ball these days, and he's likely to envision a glut of crude oil in the spring.

Ask for a forecast on prices and you're likely to hear a magic number of $15 per barrel for premium grades of oil.

That would be the lowest in nearly two years, but it doesn't seem unreasonable if oil prices continue their plunge from $24 per barrel in late October to below $20 this month.

"We think $15 is a good target. We think there is a potential for oil prices to go lower than that," said Vincent Malanga, president of LaSalle Economics Inc. in New York.

Others disagree, saying prices could go higher. But the bears seem to be much more vocal lately.

In an economic sense, the experts say, supply will outstrip demand.

The demand will fall for seasonal reasons, while supply could rise as production snuffed out by the Gulf crisis resumes.

After Iraq invaded Kuwait in August 1990, the United Nations embargoed exports of their oil and neither has been able to sell much since.

On the political level, many experts view lower oil prices as Saudi Arabia's payoff to President Bush for fighting the Gulf War.

The war kicked Saddam Hussein's army out of Kuwait and erased fears that Iraq could capture Saudi oil fields as well. In recent Organization of Petroleum Exporting Countries meetings, the Saudis have shown no willingness to cut their production, which rose by some 3 million barrels a day after Kuwait was seized.

"I really, truly believe that the Saudis, especially, are making a contribution to George's economic recovery and subsequent re-election,"

said Mike Doyle, editor of Computer Petroleum Corp., of St. Paul, Minn., which tracks a variety of petroleum prices.

Assuming people vote their pocketbooks, lower oil prices would help incumbents by giving millions of voters more disposable income.

"Crude oil prices do not sway primarily to supply and demand," Doyle said. "Those are still factors that can come into play for sure, but in between the extremes of shortages and oversupply, it's truly a political price-setting mechanism."

At the Washington-based consumers group Citizen Action, energy policy director Edwin Rothschild agrees. …

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