AJM Petroleum Consultants

AJM Petroleum Consultants

July 06, 2009 11:35 ET

AJM Petroleum Consultants: Oil and Gas Price Forecaster Cautions Against False Hope

Recent rise in crude oil price not driven by supply and demand fundamentals

CALGARY, ALBERTA--(Marketwire - July 6, 2009) - In its June 30, 2009 oil and gas price forecast, AJM Petroleum Consultants cautions against false hope driven by the recent rally in the crude oil price. While AJM economist and Vice President Operations Ralph Glass still sees conditions setting up for a longer-term recovery in Alberta into 2010, he believes the rise in crude oil price over the past few months has been driven more by speculation and currency markets than by a real shift in supply and demand.

"As the US dollar has dropped in relation to the euro, the crude oil price has risen correspondingly," said Mr. Glass. "When the US dollar begins to decline, money traders start moving dollars into commodities like crude oil. This can influence the crude oil price even though demand has not changed. In fact, we haven't seen any indication of an increase in demand for crude oil, other than speculation, since demand dropped off as the recession took hold in October 2008."

Mr. Glass believes that, until such time as there is an indication of a sustained US recovery that would affect crude oil demand - and until decreased drilling brings about a production decline in natural gas - current price increases may be a short-term phenomenon. A similar situation occurred in June 2008 when speculation, rather than a sustainable supply and demand equation, drove prices.

With this in mind, AJM's current price forecast shows crude oil prices in constant dollars based on a WTI forecast of US$65.00/bbl for 2009, rising to US$70.00/bbl in 2010, then reaching US$100.00/bbl by 2016 and holding for the balance of the forecast. The US NYMEX natural gas price in constant dollars is expected to average US$4.50/Mcf in 2009, rising with oil to a long-term price in 2016 of US$9.00/Mcf. The Canadian priced AECO forecast, which has been cut by $0.50/Mcf for the first four years of the forecast to reflect Canadian natural gas being supplanted by US shale gas, is expected to average Cdn$4.50/Mcf in 2009 rising to Cdn$8.00/Mcf in 2016. Complete forecast tables, commentary and documentation for AJM's June 30, 2009 Price Forecast are available for download at www.ajmpetroleumconsultants.com.

AJM Petroleum Consultants, a privately owned Calgary-based company, has extensive experience in exploration prospect reviews, basin evaluation studies, and reserve evaluations including evaluations of the unconventional reserves and resources of tight gas, shale gas, coalbed methane, bitumen and heavy oil. With a staff of more than 60 engineers, geologists and technicians, AJM consults for clients including active oil and gas exploration and production companies, natural gas transmission companies, regulatory bodies, financial houses, banks and investment analysts in Western Canada, North America and around the world.

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