skyrocketing oil bonanza for investors

Skyrocketing oil bonanza for

http://www.news.com.au/dailytelegraph/story/0,22049,23558406-5014099,00.html

April 18, 2008 12:00am

OIL hit a record of more than $US115 a barrel this week and could hit $US130 a barrel by June or July - bad news for motorists and transport operators but good news for investors in oil stocks.

Shares in Woodside and Oilsearch, Australia's biggest oil companies, have risen 8.9 and 5.78 per cent respectively since the beginning of the week.

So how long will it last?

"Usually at this time of the year, oil prices start to fall as the northern hemisphere comes out of winter, but this time the price has continued to rise. Demand from China and Asia, and concerns about supply, are keeping the price up, and will continue to do so," Gavin Wendt of stockmarket analyst Fat Prophets said.

He says the market is now ignoring seasonal changes, and is taking a one-year view about prices.

"In developing economies, some governments are subsidising fuel or people couldn't afford it and that is obviously helping demand. Also, when the $US is weak, the price of oil tends to rise to compensate.

"And there's no sign the $US is going to get stronger anytime soon."

He advised investors to take a medium-term view, but look to the big oil and gas producers in Australia.

"I'd really only feel comfortable recommending Woodside, Oil Search and Australian Worldwide Exploration. They're all strong producers of oil and gas, for which there is huge and growing demand in Asia.

"Oil could hit $US150 a barrel in two or three years so there is great upside to be had. Just because it's hit a record high doesn't mean it can't go further."

Prasad Patkar, of Platypus Asset Management, said: "In 2003 I'd have said $US100 a barrel would choke demand but it hasn't. I can't see oil supply improving, and I can't see demand falling off either," he said