OiL PRICES: Oil to remain above $81 despite slowdown in United States

Organisation of the Petroleum Exporting Countries
Oil will climb to a record average above $81 this year, a poll showed yesterday, as analysts believe strong Chinese and Middle East demand will offset any slowdown from top energy consumer the United States. The monthly survey of 33 analysts put the consensus forecast for US crude futures this year at an average of $81.33 a barrel, up $3.71 from last month's poll. The average price for oil last year was $72.30.

Oil's six-year rally, which has seen prices surge above $100 earlier this month, has largely been fuelled by booming economies in China, India and the Middle East. Analysts said they do not see any evidence of this demand waning despite concerns of a global economic slowdown led by the United States. "Even if there is reduced economic growth in the United States, demand remains strong in other countries as there are no other real substitutes to oil right now," said Belgian-Dutch financial group Fortis senior commodity analyst Helios Padilla-Mayer.

US crude prices have fallen to around $90 a barrel from the record peak of $100.09 reached on January 3, as traders fear a possible United States recession will cut fuel consumption.

But analysts believe a weak dollar, political tensions in the Middle East and tight supplies from Organisation of the Petroleum Exporting Countries will keep prices near current levels.

"Organisation of the Petroleum Exporting Countries member countries have become dependent on the soaring oil revenues of recent years and are likely to seek to defend them in the face of a weakening global economy by cutting production to maintain prices," said the Centre for Global Energy Studies in its monthly report.

Organisation of the Petroleum Exporting Countries meets on Friday in Vienna to discuss its supply policy.

Some ministers have hinted the group will keep production steady despite calls from the US to boost output to ease prices. Some analysts predict Organisation of the Petroleum Exporting Countries, source of more than a third of the world's petroleum, could begin trimming output as early as March if inventories continue to climb and the US economy weakens further.

"Given expectations for global supply and demand to be almost balanced in the first quarter, we expect Organisation of the Petroleum Exporting Countries to trim actual output in March or April," said Societe Generale's Mike Wittner.

Analysts forecast London Brent crude to average $79.80 a barrel this year, up $3.31 from the previous poll.

Analysts' forecasts for United States crude this year showed a wide divergence of $25.83. Goldman Sachs and UniCredit were the most bullish, predicting prices would average around $95 this year.

Although a poll showed oil will peak this year, prices will stay above $77 through 2010. Fortis was the most bullish in the long term, projecting oil to average $136 a barrel in that year. The median forecast for United States oil prices in 2010 rose to $78.10 a barrel, up $7.50 from last month's poll.

Source: Gulf Daily News
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Laice said...

Very good post and a well put together blog. I agree Oil prices will still remain high even as the US slides into recession, it basically hinges on whether there will be a worldwide recession due to continued credit crunch crisis. Only a worldwide recession will halt inflation and the price of oil.

Manuel Torres Laveaga said...

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SOUTH AMERICA: La venezolana PDVSA y la noruega StatoilHydro cuantificarán reservas en Faja del Orinoco