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Oil Prices May Spoil Demand, Says Strategist

Wednesday, 30 May 2007 | 4:00 PM ET

Oil prices continued to seesaw after clashes in Nigeria and Iran Tuesday sparked worries about U.S. gasoline supplies. Analysts Phil Flynn and David Goerz offered insights on “Power Lunch.”

Flynn, vice president and senior market analyst at Alaron Trading, told CNBC's Sue Herera, “we’re one problem away from sharply higher prices.”

Has Oil Peaked?
A look at where oil prices could be headed as we head into the summer driving season, with Phil Flynn, Alaron Trading vp & sr. market analyst; David Goerz, Highmark Capital CIO and CNBC's Sue Herera

However, worldwide demand will remain strong, he believes. “We’re not really seeing demand destruction at these prices levels,” Flynn said. In February, for instance, global oil consumption hit a monthly record of 87,069 million barrels of petroleum products. And demand in the U.S., for instance, was 21.6 billion barrels a day, 5.4% more than a year ago.

Goerz, chief investment officer at Highmark Capital, points to geopolitical forces as sources of risk. And he predicts that as prices continue to rise, demand will ease: “Last winter everyone was running around turning down their thermostats,” he said. “Obviously we’re trading in our big SUVs for more efficient cars.”

Expect oil to trade between $55 to 65 per barrel for the rest of 2007, Goerz said.

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  • Sue Herera is a founding member of CNBC, helping to launch the network in 1989. She is co-anchor of "Power Lunch."

  • Tyler Mathisen co-anchors CNBC's "Power Lunch." Mathisen also co-anchors "Nightly Business Report produced by CNBC."

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Kenny Polcari