LONDON: Oil prices are likely to stay above $100 a barrel next year despite increasing downward pressure from the expected return of some Libyan production and fears of a double-dip recession, a Reuters poll showed.
According to 29 analysts polled by Reuters, Brent crude prices will average $107.90 a barrel in 2012, down from the forecast of $109.30 a barrel in last month’s poll.
US light crude oil, also known as West Texas Intermediate (WTI), will average $96.30 a barrel next year, down from a forecast of $99.40 a barrel last month.
Despite doubts about how fast Libyan oil production could restart as fighting between rebels and loyalists to Muammar Gaddafi continues in Tripoli, analysts are beginning to account for some output in the medium term.
"The possible comeback of Libya as oil exporter after half a year of civil war will lead to even more oil supply," LBBW analyst Frank Schallenberger said. "On the other hand, the slowing down of the global economy will limit demand."
A flurry of poor economic data from the United States and Europe in the past week has already led to a sharp correction in risk assets.
In the short-term the market will focus on a speech by US Federal Reserve Chairman Ben Bernanke on Friday for hints of more quantitative easing, but US investment bank Citigroup noted this week that even if the United States printed more money, weak economic growth and fresh supplies from Libya would weigh on prices.
"If crude prices have been retreating in August, it was not because of positive expectations on the restart of crude oil exports from Libya but on negative expectations about oil demand," Olivier Jakob from Petromatrix said in a note.
Brent crude futures were trading above $110 a barrel on Friday morning.
"Growth expectations are likely to be in focus, and Bernanke’s much anticipated speech is likely to play a pivotal role for near-term price direction across all asset classes," said Gain Capital Forex.com analyst Daniel Hwang.
The previous round of quantitative easing announced a year ago has led to a sharp boost in commodity prices but has failed to revive growth of the world’s largest economy.
In the euro zone, the latest data from economic powerhouse Germany showed a steep drop in business confidence and worries about the fiscal troubles ripping through the common currency area.
"The month of August has seen one of the most dramatic turnarounds in the outlook for the global economy in living memory. Continued political squabbling, combined with poor historical economic data released around the turn of the month, led to a dramatic collapse in financial market sentiment, with many risk assets experiencing the largest falls since the period immediately following the collapse of Lehman in September 2008,"
Credit Suisse analysts said.
The $100 mark
Analyst Davide Tabarelli from Nomisma Energy expected oil prices to shed a political risk premium gained on the back of the Libyan conflict.
"Prices increased by $20 because of Libya; now they should fall by at least that portion," Tabarelli said, adding it could take around three months to bring production in line with previous levels.
But Tabarelli was in the minority. Four out of five analysts in the Reuters poll still saw 2012 Brent prices above $100.
"With the resumption of supplies from Libya, the oil price could come under pressure in the coming months, though it is unlikely to fall below $100 per barrel for long," Commerzbank analysts said in a note.
The fall in prices should also help tighten the gap between Brent and US light crude prices to an average of $11.60 per barrel in 2012 from around $24.90 a barrel currently.
Despite an expected correction of feedstock prices, Petromatrix’s Jakob warned that product prices remained at high levels that are hampering demand, and the trickle of downward revisions to oil demand projections was underway.
The latest available data from MasterCard showed US retail gasoline demand fell last week despite a drop in pump prices, in what analysts warned had been a difficult driving season.
