LONDON: US crude oil is expected to average over $70 a barrel in 2010, a Reuters poll showed on Thursday, as analysts raised their consensus forecast for the third consecutive month. Although analysts lifted their predictions, many of those polled warned that prices were likely to remain volatile over the next year as demand for oil was slow to recover during an unsettled period of economic improvement.
The poll of more than 30 analysts predicted a 2009 average oil price of $56.66, up from $52.47 in the May poll. US crude was expected to average $67.54 in the fourth quarter of this year, close to the current price of around $69.
The 2010 average forecast, at $70.87, was up $3.50 since the last poll while analysts increased their average forecast for 2011 to $80.92, from $79.27 in May.
Oil prices have more than doubled since hitting a low of $32.40 in December 2008 as the market began pricing in expectations of economic improvement that would boost future fuel consumption.
However, investors are nervous again about financial markets and are questioning whether talk of green shoots was overdone. The World Bank has cut its 2009 global growth forecast.
Our 2010 estimate ($56 average) reflects weak future oil demand. We think talk of green shoots is premature, there are still 18 months of the recession to go, said Thorsten Fischer, analyst at Royal Bank of Scotland.
Some analysts said an overhang of crude supplies would also put the brakes on an oil rally in 2010.
Supply overhang
I think the 6 million barrels per day of OPEC spare capacity, as well as high storage levels of crude in tankers, will take some time to work off, so strong fundamentals are going to still take some time to return, David Stedman, oil analyst at Daiwa Institute of Research said.
The volume of oil products stored on ships at sea has jumped by more than 20 million barrels since the end of May, and is enough to meet nearly three quarters of the world s daily demand.
The Organization of the Petroleum Exporting Countries (OPEC) agreed to reduce crude supplies by 4.2 million barrels per day, about 5 percent of daily world demand, from September 2008, which helped to stabilize prices in 2009.
However, its compliance with those cuts has slipped to around 75 percent, from 80 percent previously, OPEC s Secretary General Abdullah Al-Badri said on Tuesday. OPEC president Angola has said this week that the group s goal was still to achieve $75 a barrel by the end of the year, close to the 2010 Reuters June poll result.
Goldman Sachs, the most bullish forecaster in the poll ($90.20 for average 2010), believes supply and demand fundamentals will continue to improve late in 2009, driving a further oil rally.
(We expect) A cyclical bull market (in the second half of 2009), as the economy stabilizes and OPEC maintains cuts, to draw inventories to 10-year average levels, the investment bank said in a note accompanying its latest oil price revisions on June 3.
There were signs on Wednesday crude supplies were being reduced as data from the US Energy Information Administration showed US crude inventories fell by 3.8 million barrels in the week to June 19, more than expected.
