Commodity Prices Lowered at Canaccord

Forbes.com, Fall, 2011. This article was placed on behalf of the U.S. based equity research effort of institutional broker and investment bank Canaccord Genuity. It was part of a series of articles developed under an agreement with forbes.com to work with a variety of contributors and assist them in delivering actionable investment ideas each week. The site, forbes.com is one of the top 500 sites in the world with nearly 10 million subscribers and approximately 100 million page views a month.

This morning Canaccord Genuity energy analyst John Gerdes lowered his 2011 and 2012 commodity price forecasts. In conjunction with his forecast he also lowered his 2011 and 2012 earnings per share estimates for companies in his coverage universe.

Mr. Gerdes said, “Regarding crude oil, we are lowering our West Texas Intermediate (WTI) forecast ~$5 to ~$91.50 in 2011, $7.50 to $85 in 2012 and $5 to $92.50 in 2013. The lower WTI forecast in 2012 reflects an increase in the projected Brent/WTI spread specific to next year due to delays in pipelines necessary to alleviate the interior North American supply glut. Our overall lower oil price forecast reflects lower economic growth in 2011/2012 than previously anticipated and is modestly amplified by lower developed world oil demand intensity.”

He added, “On the natural gas front, given the likelihood of only modest growth in demand, we believe the shale-driven uplift in gas well productivity compounded by elevated drilling activity and the gas contribution from increased US oil development should leave the gas market meaningfully over-supplied. Consequently, we anticipate a ~$4 average gas price in 2012.”