[Mb-civic] CBC News - CIBC WORLD MARKETS SEES OIL AVERAGING $61 US A BARREL IN 2006

Tue Apr 26 16:29:05 PDT 2005

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CIBC WORLD MARKETS SEES OIL AVERAGING $61 US A BARREL IN 2006
WebPosted Tue Apr 26 14:54:44 2005

Toronto---Oil prices will remain high and average $55 US a barrel this
year and $61 US in 2006, CIBC World Markets said Tuesday in its latest
economic forecast.

Economists at the investment bank said global crude oil supplies are
expected to increase by only one per cent next year, which will push oil
prices higher.

"The expected rise in oil prices to $61 per barrel next year will likely
be a prelude to an even tighter supply picture emerging over the balance
of the decade," Jeff Rubin, CIBC World Markets' chief economist, said.

Rising oil prices are also expected to crimp Canada's economic growth,
the firm said. Gross domestic product is forecast to grow by 2.6 per cent
this year and 2.7 per cent next year.

Earlier this month, in its semi-annual monetary policy report, the Bank
of Canada projected 2005 growth will come in at about 2.6 per cent.
That's down from its January estimate of 2.8 per cent.

The central bank left its growth forecast for 2006 unchanged at
3.3 per cent.

With the economy suffering from high oil prices, the Bank of Canada
will be able to back off its stance on tightening interest rates, CIBC
said, adding that the central bank is not expected to hike rates this
year or next.

"Modest economic growth should not only keep the Bank of Canada from
raising interest rates, but also pave the way for a monetary policy ease
through a falling exchange rate," Rubin said.

While the Bank of Canada is epxected to hold the line on interest rate
hikes, the U.S. Federal Reserve is expected to raise rates which will
increase the spread between Canadian and U.S. rates to as much as a full
percentage point.

The cross-border gap in interest rates will push the Canadian dollar back
down to 75 cents US by April 2006, CIBC World Markets said.