Range of $65 to $80 per barrel expected to continue into 2010
Steady, stable oil prices make everyone happy
Oil prices remain on a stable glide path into next year, analysts say, after emerging this autumn from a chaotic 12-month period that saw both record highs and a brutal crash. Supported by a stable demand and supply outlook, crude oil has remained within a range of $65 to $80 a barrel since August 1. The range has been approved by OPEC, which decided on Tuesday, for the fourth time this year, to keep output levels unchanged.
Oil supply is stable, and demand is supported by Asia but held back by continued low consumption in the West, said Dalton Garis, an associate professor of economics and market behaviour at the Petroleum Institute in Abu Dhabi. Volatility in oil prices returned to "normal" after extreme swings last year and in the first half of this year, he said. "China is putting a floor on the price, but the fact that there isn't much demand from North America - and Europe is also slow - that sort of puts a lid on the demand as well," Dr Garis said. "The fundamentals really don't suggest there should be big swings in prices." He expects the stability to continue at least until April.
West Texas Intermediate crude was little changed on Thursday, the last day of trading before Christmas, falling 0.4 per cent to $76.35 a barrel. Markets were closed yesterday for Christmas, and trading volumes are normally very low in the week before New Year's Day. OPEC ministers said this week they were happy with current prices, and some agreed that $75 a barrel was good for both consumers and producers because it allowed OPEC to earn large revenues without hurting the world economy or pushing consumers to switch to other fuels.
"At between $70 and $80, everyone is happy," Ali al Naimi, the Saudi oil minister, told reporters in Angola. "The current price is good for consumers, producers and investors." Jose Botelho de Vasconcelos, the Angolan oil minister and president of OPEC, predicted that prices could hold through to the beginning of next year. "I think that for 2010 price levels will be identical to what we have today," he told Reuters.
John Hall, the chairman of EnergyQuote, a consultancy based in Britain, said: "With such support for the price band, OPEC will probably take action to support current levels."J The group's members want to avoid higher prices that would encourage faster development of renewables and new oilfields that would flood the market with more supply, Mr Hall said. "As prices exceed the $80 level, alternative energy sources start to become attractive again and so, too, do exploration projects both inside and outside the OPEC membership while, conversely, economic activity and recovery are restricted," he said. "Our view for now is that the oil price is unlikely to average out above $70 during 2010."
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