The gap in buyers' and bankers' oil- and gas-price forecasts through 2008 has become a gorge. Deal-makers are forecasting West Texas Intermediate spot prices will average $39.73 this year, declining to $31.84 by 2008, while Houston bankers project $30.39 declining to $26.11 in 2008. The 2004 difference is more than $9 while the 2008 difference is more than $5. In percentage terms, buyers expect 31% higher oil prices in 2004 and 22% higher prices in 2008 than do the bankers. The data is according to the newest OGJE/Madison Energy Advisors quarterly pricing poll. Asset buyers and sellers polled are those that are involved in deals in the $10- to $500-million range. Normally there is a chasm: producers are more optimistic about future prices than financiers, resulting in difficulty in getting buyer-banker consensus on a fair purchase price for assets or on the assets' value as collateral. However, traditionally these disagreements have been measurable in just cents, rather than dollars. For example, a year ago, the factions' 2004 oil-price forecast gap was 77 cents. The gulf today is despite that bankers have given up a great deal-their average oil-price forecast a year ago for 2004 was $23.87, and their average forecast for 2008 was $23.72. So, their current outlook is some $7 higher for 2004, and some $3 higher now for 2008. As for Henry Hub spot gas prices, the difference is still measurable mostly in cents but it is equally sharp when viewed in percentage terms. Asset buyers are forecasting $5.73 natural gas in 2004, declining to $5.50 in 2008, while bankers forecast $4.75, declining to $4. The buyers' expectations are 21% higher for 2004 and 38% for 2008 than that of the bankers. A year ago, buyers were 3% more optimistic than bankers for 2004 gas prices and 14% more optimistic about 2004 oil prices.

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