TORONTO, Sept. 8 /PRNewswire-FirstCall/ - CIBC World Markets today raised
its forecast for oil prices (West Texas Intermediate) for next year from US$65
per barrel to an average price of US$84 per barrel.
    In a study released today, Jeff Rubin, Chief Economist and Chief
Strategist at CIBC World Markets, said we are likely to see US$100 per barrel
oil sooner than later. The CIBC World Markets study predicts that oil prices
will average US$93 per barrel in 2007 with prices expected to reach or exceed
US$100 per barrel by the fourth quarter of that year.
    The September Monthly Indicators report notes that both supply and demand
factors are pushing oil prices higher. The devastation to both oilfields and
oil industry infrastructure from Hurricane Katrina will not only impact
current oil production but future production as well. 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 CIBC World Markets study also notes that world oil demand is less
price sensitive than was earlier assumed, requiring larger than originally
anticipated price increases to rein in future demand growth. The study links
the declining sensitivity of world oil demand to price and to the growing
importance of Chinese energy consumption.
    "While the full economic impact of expected oil price increases is
difficult to gauge," says Mr. Rubin, "at a minimum, the economic drag from
higher energy prices should quickly cap rising short-term interest rates in
both Canada and the United States. Apart from possibly one more rate hike on
either side of the border, Mr. Rubin noted that 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 a full
range of integrated credit and capital markets products, investment banking,
and merchant banking to clients in North America and around the world. We
deliver innovative full capital solutions to growth-oriented companies and are
active in all capital markets. We offer advisory expertise across a wide range
of industries and provide top-ranked research for our corporate, government
and institutional investor clients.

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