The average West Texas Intermediate oil prices will be affected by both supply and demand factors over the next few years, the study by chief economist Jeff Rubin said.
The study, which predicts oil will average $93 per barrel in 2007, said prices are “expected to reach or exceed $100 per barrel by the fourth quarter of that year.”
“The devastation to both oil fields and oil industry infrastructure from hurricane Katrina will not only impact current oil production but future production as well,” CIBC World Markets said in a release.
“The study expects that planned expansion of production in the Gulf of Mexico over the next two years is likely to be halved; cutting off nearly 300,000 barrels per day of potential future supply. The setbacks to planned expansion of Gulf of Mexico capacity comes on the heels of stagnant production in Russia and tapped out capacity in OPEC.”
The study noted that world oil demand is less price sensitive than was thought, “requiring larger than originally anticipated price increases to rein in future demand growth.” It linked a declining sensitivity in world oil demand to price and to the growing importance of energy consumption in China.
“While the full economic impact of expected oil price increases is difficult to gauge, at a minimum, the economic drag from higher energy prices should quickly cap rising short-term interest rates in both Canada and the Untied States,” Mr. Rubin said.
“Apart from possibly one more rate hike on either side of the border, we are likely at a cyclical peak in short-term interest rates thanks to soaring oil prices.”
CIBC World Markets is the wholesale banking arm of CIBC providing credit and capital markets products, investment banking and merchant banking.
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CI seeks to convert to trust
The Toronto company said Thursday its management expects to submit a request to the Canada Revenue Agency later this week seeking an advance income tax ruling on the planned conversion.
CI shares soared $3.05 or 14 per cent to a record $24.55 on the Toronto Stock Exchange.
CI's board of directors will consider the plan early next month and, if they approve it, shareholders will be asked to vote on its an the annual meeting, which will be held no later than Nov. 30.
“Tax rulings are generally not required for transactions of this nature, but we feel it is prudent given the size of CI, even though the structure we are contemplating is similar to existing income trust structures,” William Holland, CI's Chief Executive Officer, said in a statement.
He also said the firm has seen “many favourable changes to the long-term environment for income trusts” since it last considered converting in 2003. “These include the withdrawal of restrictions on the ownership of trusts by pension funds, the addition of trusts to the S&P/TSX Composite Index, the elimination of limited liability concerns, and the development of an asset class close to $200 billion and growing.”
CI Financial managed $71.1 billion in fee-earning assets at August 31, 2005
