Many analysts say $90 is within sight; one sees new high in 2011 Those persistent oil price bulls are threatening to crash through the gates of their holding pen once again. After repeatedly bumping up against the ceiling of their six-monthlong trading range for the past several weeks, crude prices look ready to bust out. Oil traders shrugged off a slight gain in U.S. inventories last week to push up prices for a third straight day Wednesday, as oil closed at $83.27 US per barrel on the New York Mercantile Exchange. That marked a gain of 90 cents on the day and $3.27 since Friday, when crude closed at $80 even. Perhaps more importantly, the latest gain leaves oil just 68 cents shy of its 2010 high of $83.95, set Jan. 11. For chart watchers, a move through the 2010 high would set the stage for a sharp rally into at least the mid-$80s, perhaps beyond. "We view any consolidation at the upper end of the six-month trading range as a signal that oil is getting ready for a technical breakout toward our intermediate target near $95," says Tina Normann, an analyst at Toronto-based Paradigm Capital, in a recent report. The growing bullishness is reflected by the success of Athabasca Oil Sands Corp.'s IPO (initial public offering). The $1.35-billion Cdn deal, due to close in early April, ranks as the biggest IPO in Canada since Manulife Financial went public in 1999. The new listing would also be the largest in North America this year, and the biggest in oilsands history. While few observers (other than former CIBC chief economist Jeff Rubin) are forecasting a quick return to $100-US-a-barrel oil -- let alone the mid-2008 peak of $147 -- many say $90 is within sight. "I've been expecting oil prices would move up, particularly around the second quarter, and we move into the second quarter Thursday," says Patricia Mohr, Scotiabank Group's veteran commodity expert. "So I've been expecting oil prices to move over $85 at least, to between $85 and $90. I'm a bull on oil, and we've actually had a fairly bullish forecast for a long time now." On a year-to-date basis, oil prices have averaged about $79 a barrel. That's well above the full-year average of about $62 for 2009, but still well below the 2008 average of nearly $100. For 2010 as a whole, Mohr is sticking with her current forecast, which calls for oil prices to average $83 this year and $87 for 2011. Among other factors, Mohr cites steadily rising global demand -- led by robust growth in China, as well as other developing markets like India and Southeast Asia -- along with modest gains in the U.S. Oil consumption south of the border grew by 2.7 per cent in February, and Mohr foresees similar growth for March. "Despite climbing a wall of worry over prospects for global economic recovery, world oil demand is growing again," she says in a report this week. Demand rose by 2.1 per cent in February versus a year earlier -- to 86.15 million barrels per day -- and based on her current outlook, it's on track to match the peak levels of 2007 by next year. "China remains the growth leader, with implied petroleum consumption jumping 21.6 per cent year-over-year in January-February, though part of this reflected stock building," she adds. More generally, Mohr says confidence in a sustainable global recovery is gradually taking hold, and that bodes well for commodities of all kinds. Prices for copper and nickel also hit post-recession highs over the past few days. "I think the commodity market and the (investment) funds see a strengthening industrial recovery across the G-7. So there's a lot of interest in commodities because of that," she says in a phone interview. "Last year, the improvement in oil prices was mostly to do with quite a big turnaround in demand in China, which has been leading the recovery both on the industrial side and in terms of commodity demand," she adds. "But this year you're probably going to have a somewhat more balanced picture around the world, with the U.S. and the G-7 recovering and adding to strong growth in demand from China." Although U.S. demand for end products like gasoline and diesel were weak in February, Mohr says that reflected the impact of heavy snows on the east coast and record rainfall in the southern U.S. Both reduced consumption. For his part, Rubin -- long one of the most outspoken oil price bulls -- contends that prices are destined to set new highs by 2011. "By the fourth quarter of this year, oil prices will be back in triple-digit range, and by next year oil prices will rise to record highs, taking out the high-water mark of $147 per barrel set back before the recession began in 2008," he predicts in his latest blog post. For that to occur, however, demand would have to outstrip the current global supply glut. Saudi Arabian Oil Minister Ali al-Naimi says the kingdom could hike oil output by more than four million barrels a day -- or 50 per cent above current levels -- if demand accelerates. OPEC president Germanico Pinto says that means oil prices will stay within their current trading range for the rest of the year. Another factor that's likely to keep a lid on prices is the increased use of ethanol in gasoline in North America and elsewhere, says Mohr, and the growth of LNG (liquefied natural gas) and conventional natural gas as a cleaner-burning alternative to oil.

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