Oil may top $100 on new supply shortfall

By Deepa Babington

NEW YORK (Reuters) - Oil prices could spike above $100 a barrel if a new shortfall were to hit already tight crude supplies, though such high prices may not be sustainable, Deutsche Bank's chief oil economist said on Tuesday.

Unlike previous rallies, the recent surge in oil prices has been triggered by a series of small supply problems like those in Nigeria, which could be exacerbated by a major outage, Adam Sieminski told the Reuters Global Energy Summit in New York.

"It's a supply crisis of a thousand cuts. It's these small things that add up to a lot of losses," said Sieminski. "It's certainly possible to see oil spike into the triple digits. All it would take is a big problem somewhere."

Losing another 2 million barrels a day from a drop-off in exports from the Middle East, an earthquake in Alaska or a major hurricane could send prices over that mark, he said.

"The big one every one is worried about is some kind of showdown with Iran over the nuclear uranium reprocessing issue," he said. "The potential for that not only involves Iranian exports, but possibly spill over into other countries in the Middle East."

Still, oil prices will not stay at current highs over the long term, and an economic slowdown coupled with new production could ultimately help bring them down, Sieminski said.

Already, energy demand is showing signs of responding to the higher prices, with U.S. gasoline demand growth beginning to slow, he said.

"I don't think oil can stay permanently at prices where we are now," he said. "I don't think we're running out of oil."

The current level of costs needed to produce a barrel of oil suggest that oil prices should hover within a $36 to $60 a barrel range over the long term, he said.

Oil prices have risen steadily from roughly $20 a barrel in 2002 to top $75 a barrel earlier this year on fears of supply disruptions and fast-growing demand in India and China.

To get prices back down to the $20 level, however, a new technological breakthrough that cuts costs to find and drill for oil would have to occur alongside a decrease in the level of taxes levied by governments, he said.