Oil prices to go up sharply soon

Long-dated oil future contracts are seen as a gauge of how expensive the market thinks oil will be in five years time, and many investors believe that as the global economy recovers from its current malaise, crude prices will soar once again.

A larger proportion of the world's oil supplies are expected to come from more expensive projects in the coming years, with much of the easily accessible oil with lower production costs already exploited.

clipped from www.reuters.com LONDON (Reuters) - U.S. crude oil futures for delivery in January 2014 are trading at a record $30 premium to current contracts, as investors bet that the long-term trend toward higher prices will remain intact despite oil's slump to $50 a barrel. "Oil's spike to almost $150 a barrel was based in large part on tight supplies and growing expectations for demand from China and India. That's still going to come, and now there's even less investment in future oil production due to the double whammy of weaker prices and the credit crunch, supplies could be even tighter in the coming years." Historically, the correlation between the current oil price and the five-year price has been much closer. From May 2005 until July of this year, the difference between the two contracts was never more than $10 a barrel, and averaged around $6 a barrel.