The firm’s forecasts for 2006, 2007 remain unchanged at $64, $66, before falling back to $43 beyond 2008. “However, we are quick to note that potential supply disruptions and continued geopolitical tensions could keep prices from falling to our forecasted levels,” it says.

UBS’s natural gas price forecasts remain unchanged. But the firm suggests that oil prices will likely remain strong for the forseeable future. “Despite talk that high oil prices will lead to demand destruction, UBS forecasts demand growth of 1.7%, 2.1% and 2.2% respectively for 2006-2008,” it says in a new report. “Driven by geopolitical tensions in Nigeria, Iraq and Iran coupled with Chinese demand growth, we see oil prices remaining strong in the near future.”

“We believe the oil price rally will continue through 2008,” it says. “Going out three years we have a less bullish view as cautious projections of supply evolutions and our view on demand could see prices retreating.”

This revised outlook has a modest effect on the net asset value of oil weighted names, it adds. Cash flow and earnings estimates remain unchanged for 2006 and 2007, “but NAV is positively affected for Calvalley and TransGlobe due to a comparatively higher proportion of oil production”, it notes.