The current bearishness in crude oil prices is expected to prevail for most of 2009 as the global financial crisis is likely to depress demand further, analysts said.
The levels being forecast for 2009 are a far cry from the heady target of $200 a barrel originally pegged by global majors such as Goldman Sachs for end-2008.
Most analysts don’t expect oil to rise above $75-$80 a barrel in 2009. However, the views on the downside vary, with some analysts even expecting prices to drop to $18 while others are of the view oil prices have already bottomed out.
Goldman Sachs has slashed its 2009 price forecast for West Texas Intermediate crude oil to $45 a barrel, down 40 per cent from its previous estimate.
“We revise down our 2009-11 crude oil price forecasts in view of a more severe-than-expected deterioration in oil demand globally... We believe that oil prices will need to drop to below cash cost levels to drive forced shut-ins by non-Opec producers,” Goldman Sachs said in a recent report.
Projections of crude oil prices for 2008-09 have witnessed a sharp turnaround as the prices have plunged from the July 11 record high of $147.27 a barrel to over four-year lows of $39.19 earlier today.
Price views
President Chakib Khelil of the Organization of Petroleum Exporting Countries (Opec) on Wednesday said, $70-$80 a barrel would be a “fair price” for oil.
“Oil prices can witness a sharp bounce as the year progresses as the immense focus on demand has led to people ignoring the supply aspect. Supply issues are being ignored, and even one geopolitical issue can spark off a rise in oil (prices),” said Gnanasekar Thiagarajan, director, Commtrendz Risk Management Services.
Thiagarajan expects oil to find resistance near $75.80 a barrel, which, he said, it is likely to hit in July-December.
At 4:15 pm today, crude oil contract for January delivery on the New York Mercantile Exchange was trading at $40.84, up 78 cents from Tuesday.
Aurobinda Prasad, analyst, Karvy Comtrade, expects oil to move in the $25-$80 a barrel range in 2009.
“I expect oil prices to slip to $18 a barrel if the crucial $25 support is breached but I don’t expect the $80-a-barrel resistance to be broken during the year,” Prasad added.
Rajeev R Darji, senior research analyst, Parsoli Commodities, is of the view oil prices will stay in the $25-$50 a barrel range till June-July but recover from these levels to trade at $80-$100 by year-end.
“Low oil prices will help most countries across the globe sustain their economies, and that will boost oil consumption gradually. By the end of the year, we will be looking at higher oil prices once again,” Darji said.
Demand-supply situation
Opec announced on Wednesday that it would cut output by 2.2 million barrels a day from January 1 in a bid to stem the fall in oil prices and balance the oil market supply in line with weakening demand expectations.
The cartel expects world oil demand for 2009 to fall 150,000 bpd to an average of 85.68 million bpd, the cartel said on Tuesday.
“The worsening world economy is expected to have a large impact on oil demand next year, especially in the Organisation for Economic Cooperation and Development countries,” Opec said.
International Energy Agency, however, sees a small recovery in oil demand. In its latest forecast, it expects 2009 oil demand to edge up to an average 86.3 million bpd, based on International Monetary Fund’s projections for 2009 global economic growth.
“Although demand growth in India, China, and West Asia may be slower, there will still be oil demand growth in 2009, offsetting fall in demand from OECD countries,” Nobuo Tanaka, executive director, IEA, said on December 4.
