One on One with Bruno Stanziale of Bank of America
Wednesday, October 17, 2007
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SUSIE GHARIB: More analysis now on those high oil prices. As Paul just mentioned, oil touched $89 a barrel in New York trading today, then retreated to settle at $87.40. Joining us, Bruno Stanziale, principal in commodities sales at Bank of America. Hi, Bruno.
BRUNO STANZIALE, PRINCIPAL IN COMMODITIES SALES, BANK OF AMERICA: Hi.
GHARIB: Well, how long before we're talking about $100 oil?
STANZIALE: That's the million dollar question. Look, if the momentum keeps going the way it is, we could see it before the end of the year. Um, look, I think the answer to that question is to what extent do you believe this move higher in crude oil is manifested in fundamental reasons and how much of it is really manifested in concern over geo-political events? I don't think.
GHARIB: Which is it? Which is it? Is it geo-political or is it real supply/demand?
STANZIALE: I think that the overall trend is higher based on fundamental reasons. I do not think we're trading $87 right now because of fundamental reasons. I think we have a good amount of fault in the market around peoples' concerns about the Middle East, Turkey and even to a greater extent the Iranian confrontation. If those situations escalate in tandem with fundamentals tightening as they normally do going into Q4, we have heating demand, etc., then we could probably see $100. I don't doubt that. But, again, I think it's the combination of the two.
GHARIB: How about the other way around, Bruno? Let's just say that the tensions between Turkey and Iraq stabilize. Then what do you see the price of oil? Is it going to go below $80?
STANZIALE: I don't think so. I think it'll have a hard time going below $80. It may flirt with $80 for a little bit, but I think that there's probably about $3 or $4 of sort of Turkish, um, you know, tones to it. I dot think there's as much in it, into the price, and you know, revolving around the Turkey situation. I think that in tandem with the Iranian situation is why we're at $87 in lieu of $75. So I think tomorrow if we get a headline out that says, look that situation has been resolved, you'll see an intermediate correction down to $80 or $82, but I think that's about it.
GHARIB: OK, now, gasoline prices haven't been moving much. They're still below $3 a gallon nationwide average. Do you expect gas prices to go up as crude prices rise? I mean, why are gasoline prices staying as low as they are?
STANZIALE: Well, they have not had as good a run as crude oil, relatively speaking. It's actually a good point. I mean, this has been a crude-driven rally. We're out of peak season demand for gasoline. Quite frankly, we should probably be trading a lot lower. The reason why we're trading where we are is, A, crude oil is non -- you know, unstoppable at this point and in addition to that, we have very low gasoline stocks, historically low gasoline stocks, so people are already starting to worry about next summer's demand. I think that we will be able to produce enough gasoline. I think we'll be able to see enough imports as we saw in today's numbers, to put pressure on the front of gasoline prices. I expect gasoline prices to dip further from here.
GHARIB: All right, real quickly, is there a level at where oil goes that it could hurt the economy? I know you're not an economist, but what do you think, real quickly.
STANZIALE: I think it's a function of how quickly we get there. If we go to $100 within a month and we stay there, I think that hurts the consumer.
GHARIB: All right. Thanks a lot, Bruno.
STANZIALE: Thank you.
GHARIB: My guest tonight, Bruno Stanziale, principal in commodity sales at Bank of America.
