Always conservative, banks hiked their oil and gas price expectations for the rest of 1999 and for the year 2000, according to Madison Energy Advisors Inc., an upstream transaction specialist. The firm polls Houston's four largest energy banks on a quarterly basis. "The banks had a remarkable escalation," Madison president Geoffrey G. Roberts said. Banks increased their forecast for West Texas Intermediate spot prices for the rest of 1999 to $18.99 per barrel, a $3.11 jump from three months earlier. They also increased their 1999 gas expectations from $2.22 per million Btu to $2.32. "Banks are so conservative. They move so slow. I don't think we've ever seen them change their prices that much from quarter to quarter," Roberts said. "When [oil] prices started to rebound around midyear, the banks didn't respond very well. They kept their July forecast way down at $15.88, even though at the time they made that forecast, oil was back up around the $20 range. By the time they got to Oct. 1, oil was up to $26, and they had to concede that it was time to follow the mark a little more closely," Roberts said. Although banks traditionally are more conservative in their pricing, they also have been more accurate than have middle-market E&P companies when it comes to predicting prices, added Roberts, who has been taking pricing polls for 13 years. "They like to stick to a fairly predictable price forecast, and they are perfectly willing to watch prices jump around a couple dollars without making any big moves. As a result, the banks have been more accurate over time. There is a lesson there," Roberts said. For the year 2000, the polled banks expect West Texas Intermediate crude prices of $18.11 per barrel and natural gas prices of $2.28 per million Btu. -Paula Dittrick

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