Posted: August 22, 2008

“The world now has a precariously balanced oil market that cannot withstand any meaningful oil supply disruptions without significantly higher oil price implications,” warns a new report from Raymond James & Associates, the investment banking firm.

This precarious balance is due to both geopolitical factors and a lack of oil supply growth in non-OPEC countries, Raymond James’ Houston-based energy analysts said. Geopolitically, Raymond James said the Russian threat to the oil pipeline running through Georgia must be added to the existing conflicts between Iran and the West and between Turkey and Iraq. Each is an oil “hotspot” that could cause oil prices to rise. “Additionally, increasing demand from Caspian countries for a bigger piece of the oil profits may continue to delay and push back some of the larger projects scheduled to come online over the next five years,” the report noted.

Caspian project delays are part of why Raymond James sees non-OPEC oil production being essentially flat through 2012 or so. “We believe that over the next three to five years, the world will see no meaningful or sustainable net increase in non-OPEC oil production.”

With non-OPEC output 60% of total global output, and with per-capita oil demand continuing to rise in Asia, India and the Middle East, Raymond James fears “significantly higher” oil prices will result should there be any flare-up in geopolitical tensions.

To read Part 1 of this series about Raymond James’ new oil supply fears, please see:
Raymond James Says State of Russian Oil ‘Much Worse than We Would Have Imagined 6 Months Ago’ (Pt. 1 of 2)