Oil prices rose above $68 a barrel Monday as a rally fuelled by an improving economic and corporate outlook extended into a third week.
Oil to average $73 in 2010
LONDON // US crude oil is expected to average nearly $73 a barrel in 2010, a Reuters poll showed on Tuesday, as oil demand improves, albeit at a sluggish pace. Although the poll of more than 30 analysts showed a higher consensus forecast for a fourth consecutive month, many of those polled warned oil prices were likely to remain volatile throughout the second half of 2009 and into 2010. The poll predicted an average 2009 US oil price of $58.23, up from $56.66 in the last poll. Twelve analysts increased their forecasts for 2010, while just one reduced their estimate. US light crude was trading around $68.70 on Tuesday, within the $60-$70 range it has been in for the last two months as investors remained cautious over signs of economic recovery. Analysts in the poll said US crude would average $67.08 in fourth quarter 2009, down from $67.54 in the last poll, as doubts over the strength of economic improvement and improved fuel demand were expected to delay a sustained oil price rally. "Fundamentals still look weak and we expect a downwards correction to prices during the summer. Gasoline demand in the US remains disappointing," said Christophe Barret, global oil analyst at Calyon. Oil price gains in 2009 have tracked rallies on global stock markets as cautious confidence returns to the market but analysts have warned weak economic data and disappointing corporate results point to a correction. "I think equity markets could need a break and also I think there is too much economic optimism in current oil prices. In the short term, prices could fall to $50-55," said Frank Schallenberger, head of commodity research at Landesbank. Landesbank forecast US crude to average $55 in 2009, $71 in 2010 and $82 in 2011. On Friday, the Reuters/University of Michigan said US consumer confidence, a predictor of future household spending, fell to 66.0 in late July from 70.8 in late June. The closely-watched gauge fell for the first time since February as Americans' concern about a tough labour market deepened. Consumer spending accounts for nearly 70 per cent of the world's biggest economy. Meanwhile, unemployment in many countries is expected to rise well into 2010, as companies continue to slash costs to retain meagre profits in a weak business climate. Analysts said when the global economy did eventually recover and demand for oil accelerated there could be an oil supply shortage due to lack of investment in new ventures, which would push prices higher. "More robust GDP in 2011-12 and prospects that supplies will be lower then suggest the dip in 2010 will be followed by a midterm rebound in oil prices," Deutsche Bank said in a research note accompanying its oil price forecasts. Supply curbs by the Organization of the Petroleum Exporting Countries were expected to contribute to any oil shortage, after the producer group agreed last year to cut output by 4.2 million barrels per day from its levels in September to support falling oil prices. Arne Lohmann Rasmussen, head of commodity research at Danske Bank, was more bullish and expected fundamentals to improve by the end of this year, predicting a fourth quarter average 2009 US crude price of $73. *Reuters