Analysts Forecast High Oil Prices and OPEC is Looking For the Reason.
Oil prices will remain on high levels during 2010 according to analysts and investment banks estimates, although the world economy has not fully recover from recession and demand remains weak. Twenty nine analysts polled by Reuters news agency this week forecasted that oil prices in the U.S. market expected to rise to an average of $77.50 a barrel in 2010. The poll of 29 analysts showed a rise in the consensus forecast for the ninth consecutive month and note that in April of last year, the average forecast for 2010 was $65.95 a barrel. "Oil is likely to trade in a wide range over the next 3 to 6 months, possibly $65 to $85 a barrel. Capped on the upside by weak fundamentals but supported above a theoretical fundamental level by still-ample liquidity conditions" analyst Harry Tchilinguirian at BNP Paribas said.
Meanwhile, Morgan Stanley is much more bullish on crude oil price. The U.S. investment bank forecasts that oil price will price near $100 per barrel at $95 as demand recovers. Besides that, declining crude inventories and the improving global economy will boost prices from current levels of around $75 a barrel and as a result crude oil in 2011 will average $100 a barrel.
Morgan Stanley"s analysts estimate that fundamentals will continue to improve. ?Our increased 2011 price forecast reflects an improved GDP outlook that will require a higher price to ration demand to meet inadequate supply? says the note that the bank published last Monday. According to Morgan Stanley estimates global oil demand is forecast to grow 1.7 million barrels a day and global gross domestic product by 4 percent, according to Morgan Stanley. Global spare capacity, pegged at 6.5 million barrels a day for the fourth quarter of 2009, will fall to 5.7 million by the end of 2010.
At this point we must underline that Morgan Stanley maintained its long position on U.S. benchmark West Texas Intermediate crude for delivery in December 2011.
On the other hand, OPEC"s view of the market is completely different. According to the latest Monthly Oil Market Review, that covers the month of December, crude oil prices started 2010 with a surprising rally. ?The price of WTI averaged $82.48/b in the first week of 2010. With the exception of 2008, this is the highest starting point in recent years. As the market had been expected to continue to moderate, the jump in prices came as a surprise. Although prices have receded in recent days, this raises the question as to whether there are any new factors in the market that would support a higher price level or if the surge in prices represented only a temporary increase? the report says. It is more than clear that cartel members did not see a reasonable reason for this price hike as market fundamentals remain weak. But when the basic cartel of a market is looking for the reasons that send the price of its product higher, we must worry.