Oil price forecasts trimmed for fourth quarter, 2011

Thursday, 30 September 2010 05:22 - - {{hitsCtrl.values.hits}}

(Reuters) - Oil prices will average less than previously expected in the fourth quarter and in 2011, a Reuters poll showed, as bulging global oil supplies and weak demand from developed nations keeps prices in a tight range. The poll of 28 analysts, banks and government agencies showed lower consensus forecasts in a still fragile macroeconomic context. U.S. crude price average forecasts for the fourth quarter were revised down to $77.48 a barrel, almost a dollar lower from $79.36 in August. This cut 2010 forecasts to $77.96 a barrel from $78.63 last month. This is the fifth consecutive month that the average 2010 price forecast for U.S. crude, also known as West Texas Intermediate, was downgraded in the Reuters poll as prospects of a robust economic recovery remain uncertain. “The restrained outlook for developed economies coupled with abundant supply suggests oil prices may remain under pressure,” said Daniel Hwang, senior market strategist at Gain Capital Forex.com. Forecasts for 2011 were also cut to $83.00 a barrel from $83.84 in August. U.S. crude oil prices have traded range-bound over the past month, gaining some support towards $75 a barrel from the eight-day closure of the key Line 6A Enbridge oil duct between Canada and the United States. Investors have been looking for clues of economic recovery in the U.S., the world’s top oil consumer, where crude inventories are at record high levels. The latest bigger-than-expected U.S. weekly unemployment figures have highlighted continued labour market weakness. European consumer spending has also remained under pressure, with the latest reading of euro zone services and manufacturing data slowing more than expected as firms hired fewer new workers this month. “Our view remains that high oil inventories combined with sluggish demand conditions in most advanced economies are expected to keep the oil market in surplus over the rest of 2010,” National Australia Bank commodities economist Ben Westmore said. “Although we do expect upward pressure on the oil price as demand conditions in the U.S. and euro area improve further, prolonged fiscal consolidation in those heavily indebted nations will provide a headwind to the oil price recovery.” Brent crude is seen averaging $78.25 in the fourth quarter, down from August’s average forecast of $79.10. U.S. light crude oil for November delivery rose 12 cents to $76.61 a barrel by 0933 GMT on Monday after earlier touching $76.85, the highest price since Sep. 14. EMERGING MARKETS DEMAND “Demand from the emerging market will be the main driver for oil demand in 2011,” said Frank Schallenberger, head of commodity research at Landesbank Baden-Wuerttemberg. Oil demand in China, currently the second-largest consumer in the world, accelerated in August and is expected to continue to lend support to prices. “A continued stream of positive data (from China) would be demand supportive and thus price supportive,” Gain Capital’s Hwang said. OPEC supply levels are expected to remain unchanged when the cartel meets on October 14 in Vienna. OPEC, the source of more than a third of the world’s oil, has kept its output limit unchanged for almost two years. Earlier this month, Libya called for higher prices, breaking with views expressed by the organisation’s top oil producer Saudi Arabia. Going forward, the poll respondents expect a significant increase in the price of WTI year-on-year, going up to $87.46 a barrel in 2012 and $88.64 the following year.