NEW YORK - Few saw record high oil prices coming. Even fewer thought they would stay. Now the question befuddling the energy industry is whether US$59 a barrel oil is near the top of a multiyear run or the bottom of an even steeper rise.
Over the past year, rocketing demand from Asia and turbulence in oil-producing nations have combined to push crude prices above US$59 a barrel mark on Monday (US time), defying forecasts and spreading fear across the global markets.
Higher oil prices usually translate into higher costs at the petrol pump for drivers.
And just about everyone has a different take on the matter.
Chief executives from Exxon Mobil, Apache Corp and Devon Energy, among others, will offer their views on the sector's hot button issues -- from China's appetite for energy to options for the cash windfall bequeathed by strong oil prices -- during a three-day Reuters Energy Summit beginning Monday.
Oil's roller-coaster run this year -- starting near US$42 in January climbing to near US$60 on Monday -- has the world's crude experts adjusting their outlooks.
Goldman Sachs earlier this year predicted that oil prices could shoot up to US$105 a barrel, while companies like Exxon Mobil Corp maintained that the price of oil, like that of any commodity, is cyclical and will fall back to more normal levels over the long term.
"We're in uncharted territory here," said Brad Beago, an energy analyst with Calyon Securities.
"The differences in perceptions have a wider range than I've ever seen in my career. You've got the majors that recently raised their long term outlook to US$30 oil. Then, you've got others looking at it saying, US$58 may just be the beginning of an overall tightening in the supply and demand situation that will not get fixed."
Either way, oil's ascent has made the energy sector among the hottest in the stock market in recent months, prompting similar concern over whether the bullish run in energy stocks is close to an end.
"There's only two sectors that's made any money in the last 12 months, and that's energy and utilities," said James Halloran, analyst with National City Private Client Group, which manages US$33 billion in assets. "The biggest fear is that people don't want to be buying at the top."
Among the main concerns overhanging oil companies is that they are cash rich and opportunity poor. Cash levels are soaring as access to sizeable new oil reserves is limited.
Most regions in the world that boast vast oil reserves, such as the Middle East and Russia, are off-limits or difficult to access for Western companies while oil fields in their backyard, like those in shallow waters in the Gulf of Mexico, are largely mature.
At the same time, Western oil companies must now battle for dwindling oil resources with newer, powerful entrants on the global energy scene: national oil companies from fast growing nations like India and China.
In short, analysts say the oil market is perched in a precarious balance, with demand spiralling up, spare oil capacity diminishing and the outlook increasingly murky.
"The consensus for the last 20 years has been that global oil production is going to be sufficient to meet demand growth for at least the next 20 to 30 years," said Beago.
"Well, suddenly we saw a spurt in demand last year and supplies were barely able to keep up and this cushion of excess supply that everyone's talked about and relied on for years, suddenly wasn't there," he said adding, "Now the system is running flat out with no cushions, and that's scary."