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Oil Prices Headed for a 151-Year High?

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    Ned Davis research analyst John LaForge on why he expects oil prices to rise.

  • Duration 5:10
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Oil hitting a nineteen week high today pushing nearly a quarter of all energy stocks in the SP 500.

To 52 week highs while we have an analyst.

Who says crude is set to rise even more faults.

In fact he's calling for prices to reach a 151.

Year high.

Joining us now is John to forge Ned Davis Research analyst John good to see it thanks for coming in appreciate it.

Good to see you to think -- it let's just explain what we mean by the way because -- folks will remember.

Back in 2008 I guess who was at around July of 2008.

The price of Brent went all the way up to about a 14547.

Dollars.

But it didn't sustain that because we have this huge drop off in fact I think we have a chart.

Of the price of -- from 2003.

All the way up to present see that that run up there.

Right in the middle or towards the beginning of that chart that's up to that peak in July 2000.

And then that huge drop off -- went back down to forty dollars a barrel.

You're saying that it it didn't sustain that -- but we could have sustained period of over hundred dollars a barrel.

And that's exactly what we're saying David basically if you look back a 150 years.

We're very very closely all time high speed the all time high as of now is 1864.

Not not 1964 but 1864.

Well only a few years after oil was discovered in the US -- -- -- around eight dollars a barrel but if you put that in today's terms you're talking about a 115 dollars a barrel.

And last year the average price was a 113 -- were only a couple a couple of dollars off and we think this year based on supply and demand don't gonna break at this.

Right now let's talk about why this is happening you mentioned spotted at the dollar price of -- -- so many variables.

-- primary primarily of which is is the Federal Reserve board -- that it's if if you're talking just about the dollar price.

It's how you price the dollar in the Fed does a lot of that but supply and demand is at all because of of the demand from China and India and the other emerging markets it's pushing the price higher.

Almost all of it surprisingly if you just go back to 19941995.

We've had about twenty million barrels more produced a day in the world.

Almost all of that has come from the emerging markets but almost all of that demand has also come from emerging market so yes.

Most of its emerging markets and of that piece.

China is a very large slug -- -- the twenty million roughly.

That we've gone up Chinese consumed almost eight million more barrels a day in the last fifteen cent.

-- now let's talk about the other side of the equation which is supply and a lot of folks say look at what is happening.

With our discovery of of oil in shale with the of course that -- the price.

Push from natural gas pushing the prices of oil -- with all these new reserves that are coming on -- my guided in North Dakota alone.

You have four billion.

Barrels in reserves -- based on the -- -- so with all this new supply coming on board isn't that going to affect the price of -- -- down.

It could but we don't think it's gonna be this year basically what you have in the developed world.

He is production is falling not rising to US is one of the very few areas that in Canada where you have production moving up most productions moving down.

You look into -- a large suppliers over the last couple of decades Norway and Mexico they keep falling.

So which you have when you put the whole pipe together in the world what you're seeing production wise is flat production in the world.

We go back to 2000.

You've had oil production in the world's gone up by 18%.

GDP in the world has gone up by more than 53%.

Aren't you can have GDP which is demand outstripping supply that 18% well and -- -- Now a lot of that is a lot of that's what's happened in China because you have hundreds of millions of people coming into the middle class.

Demanding more products and goods -- -- But you also have some amazing discoveries and try to -- let me just bring one of those and then we got to leave it.

We have Wilbur Ross on Wilbur Ross is no dummies a very Smart investor he is investing a lot of his own cash.

Into development of natural gas in China.

China has more natural gas reserves in the United States does now they -- give me an idea of how large it is.

He suggests that that it may be possible for them to fill their own energy needs.

By the ability to tap into their own natural gas wouldn't that drive down the price of oil ultimately.

It could but it's gonna be years David I mean truly years because the infrastructure that is used for oil what we use oil for driving heating and -- want is not necessarily what we use for natural gas.

I say it's gonna take years to get the infrastructure in place -- think in the US even knowing -- you're talking China.

-- 180000.

Gas stations here in the US only a thousand of them have any form of natural gas.

It's -- to a long time to build that infrastructure.

Within China it's the same way you're gonna use natural gas is a resource you have to have that infrastructure in place.

Not -- the US have the infrastructure place forget about China.

Fascinating ideas John -- forge Ned Davis Research analyst good to see John thanks for coming in appreciate -- -- him with --

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