Iran Backs Morgan Stanley Prediction Of $150 Oil.

Oil prices spiked by a record 9% in a day, to slightly over $139 a barrel, Friday. The spike is widely believed to have been prompted by a Morgan Stanley forecast that oil prices will rise to $150 a barrel before July4th, the Independence Day holiday week, which is traditionally the busiest driving week in the US.

Now Mohammad Ali Khatbi, Iran's representative to OPEC, has said the same thing. On Sunday he said,'I forecast that by the end of the summer, the price of oil will reach $150 per barrel.' He blamed the weak US dollar and the situation in the Middle East for the rise in oil prices. The already tense situation in the Middle East was further aggravated by the remarks of Israeli minister Shaul Mofaz, who on Friday said that an attack on Iran looked 'unavoidable,' to stop it from acquiring nuclear weapons. The Israeli government, undoubtedly under pressure from the US, sought to distance itself from these remarks, and a senior defense official said Sunday that the remarks did not reflect official policy. The Iranian government meanwhile has demanded action against Israel from the UN Security Council, for making the threat.

Meanwhile, an increasing number of influential voices have now started saying that there is a bubble in oil prices. George Soros says:' Speculation....is increasingly affecting the price. The price has this parabolic shape which is characteristic of bubbles.' However, no one has as yet stuck his neck out to predict when oil prices will decline.

How good is Morgan Stanley's prediction? It is worth remembering that it wrote off about $9.4 billion in subprime losses in December of last year, and was itself rescued by the Chinese state investment company CIC, which picked up a 9.9% stake in the company for $5 billion!

As for Iran, inflation for the Iranian month ending May 20th was at 25.3%, up from 24.2% in the previous month, its central bank revealed Sunday. President Ahmadinejad's government is facing increasing criticism at home, for its handling of the economy. One of the country's most influential clerics, Ayatollah Nasser Makaram Shirazi has said that,' the bad management in the economic affairs of the country is perfectly clear.'

So you have a choice between the prediction made by a failed merchant banker and a failed State. It will be interesting to see whether, once the oil bubble gets pricked, the US government will come up with another bail-out package for the banks and financial institutions involved.