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Crude oil prices may rise on Gulf of Mexico oil spill disaster
Published on May 25, 2010 by oilprices · No CommentsThe US oil spill disaster currently spreading across the Gulf of Mexico will help drive energy and crude oil prices higher as new measures to prevent further disasters bump oil production costs, the head of commodities and energy at BNP Paribas told the Reuters Energy Summit on Monday.
The massive spill, caused by a well blowout and rig explosion last month, is one of a number of factors that will help oil prices rebound to the mid $70 a barrel range or higher this year after dropping sharply in recent weeks.
“We see crude moving back to the mid $70, $80 area, with Chinese demand continuing and increased costs coming through to production by virtue of what we are seeing in the Gulf right now,” said Lincoln Payton. “At some point that will trickle through to the consumer.”
Oil prices have sunk to $70 a barrel after rising to nearly $90 a barrel at the beginning of May, as swelling US inventories and euro zone economic woes weighed on sentiment. But, going forward, natural resources are a relatively safe investment as continuing economic uncertainty tarnishes other purely financial plays, Payton said.
“This is a very dangerous time,” he said. “With the European stress in the last few weeks, we have seen a change in sentiment. That has brought a lightening of risk but also a lack of confidence.
“I think you can take a medium long-term position comfortably in certain natural resource businesses because we can assume that they are and always will be fundamental to our economies.”
“We have seen natural gas go through a cycle where there was a perceived surfeit and I think in the medium term that is going to change,” Payton said. “I see natural gas being a good investment in the medium term and that probably kicks in about a year.”
Despite low prices, the number of rigs drilling for gas has been on a mostly steady uptrend this year, a trend Payton puts down to the promise of future price rises.