Physical U.S. crude oil will average $150 a barrel this year due to the unrest in North Africa and the Middle East, despite the emergency oil stock release coordinated by International Energy Agency's (IEA), a U.S. fund manager said.
Monty Guild, the chief executive of Guild Investment Management, said the IEA's move did not change oil's fundamentals.
"Our opinion continues to be oil prices will reach $150 barrels this year due to the fighting near Saudi Arabia," Guild told Reuters in a telephone interview.
He was referring to escalating violence in countries such as Syria and Yemen. These countries are very small producers but the market has been concerned about the spillover of the unrest to Saudi Arabia, the world's top oil exporter.
North African producer Libya's oil supply has been disrupted since February because of its continuing civil war.
Last month, the IEA, advisor for 28 industrialised nations on energy policy, announced that member countries would release 60 million barrels of crude oil and refined oil products to cover the lost oil supply from Libya and to pull down high prices.
But international U.S. crude oil and ICE Brent crude futures have risen to the levels above where they were before the IEA announcement, after the sharp fall in the initial reaction to it.
"It has changed nothing. It is purely political," Guild said.
His oil price forecast refers to the average price to buy physical crude oil in the United States. Physical crude oil prices are $12-$15 per barrel higher than U.S. crude oil futures CLc1 depending on grades of oil and the geographical locations, he said.
U.S. crude futures were trading $96.93 a barrel by 1546 GMT on Wednesday.
Guild also said Saudi Arabia has surplus capacity to boost output volume when supply is tight but the quality of Saudi oil might limit its reach in the market.
"Their oil is sour and very heavy that is very expensive to refine. Therefore the prices they are offering are not good prices," he said. "Prices are not attractive because cost of transporting and refining the oil they are producing are so high, so they are not offering any bargain."
Guild Investment Management, based in Los Angeles, California, has about $150 million of assess under managements for selected clients.
Its portfolio includes equities, foreign currencies, gold and some precious metals mostly through exchange traded funds (ETFs).
The fund currently has an approximate 25 per cent allocation to the global oil and energy sector.
It has expanded its equity portfolio again to agriculture and related stocks, such as fertiliser, and Asian emerging markets such as India and Malaysia, after exiting these assets in March to focus on energy and commodities.
Its current holdings include Brigham Exploration Co. Deethree Exploration LTD, Teucrium Corn Fund, SPDR Gold Trust, ETFS Gold Trust and others.
Gold and agricultural commodities will continue to rise, Guild said, as many countries, such as China and Russia, will increase their holding in gold in their national portfolio.
Food prices will be supported due to expected growth in demand from India and China, he said.
He also has a view that U.S. Federal Reserve's second round of quantitative easing, or QE2, did little to boost actual economy. The programme ended in June.
"To many observers it appears that all QE2 did was run up asset prices of gold, oil, stocks, and some other commodities," he said.