Oil Price forecasts cut sharply on slowing Demand

Analysts have further cut their 2009 price forecasts by more than $14 a barrel to an average of $58.48 for U.S. crude as recession dampens demand for fuel worldwide, a Reuters poll found on Tuesday. Forecast oil prices have fallen by nearly $60 in the past five months, but analysts still see prices rising early next year from this year's lows of less than $40 a barrel. The consensus forecast was for U.S. crude to average $49 in the first quarter of 2009, down from $64.57 in last month's poll, as analysts moderated their expectations of a price recovery.

The poll also forecast an average for European benchmark Brent LCOc1 in 2009 of $57.21. When oil hit a record above $147 in July, analysts expected U.S. oil to average nearly $116 in 2009, a Reuters poll showed.

Goldman Sachs was then the most bullish bank on prices, expecting an average $148 for U.S. crude next year. It has subsequently cut that same forecast by $103 to $45 a barrel.

"We believe that should the sharp deterioration in demand continue, spot prices will likely remain under significant pressure and may have to decline further to induce a reduction in supply," analysts at Goldman Sachs said in a research note.

Of the 30 analysts surveyed, 23 have lowered their predictions since Reuters last poll on 25 Nov. A crucial consideration in analysts' forecasts was the impact that output cuts made by the Organisation of the Petroleum Exporting Countries (OPEC) would have on prices.

"The OPEC cartel continues to 'bull the market with positive vibes' regarding their future production whilst the bears in the complex will eye the ailing demand outlook for oil across the Asiatic basin," said Robert Laughlin at MF Global.

Source: Reuters