US crude oil should average nearly $50 a barrel in 2009, as Opec production cuts establish a floor under prices, but economic weakness will limit gains, a Reuters poll showed on Wednesday. The consensus forecast in the poll of more than 30 analysts fell to an average for 2009 of $49.73 per barrel of US crude oil, down from $51.52 in the previous poll in February.
This is the ninth poll running that forecasts have fallen but it is the smallest decline among these polls. "Opec has done a much better job of contracting supplies from the marketplace than many have expected, setting the stage for a gradual price recovery in the second half of 2009," analysts at First Energy Capital said in a research note.
The analyst consensus showed prompt Brent crude oil futures would average $50.63 a barrel in 2009, a slight premium to US crude, but analysts said US crude would be at a premium to Brent in the second half of 2009.
The poll predicted US crude prices would recover to average $66.38 in 2010 as the full impact of the Organisation of the Petroleum Exporting Countries (Opec) production curbs affected global crude supplies. In an attempt to bolster prices, Opec has promised to cut its oil production by 4.2 million barrels per day (bpd) from its output levels in September 2008.
"Ten years ago a 4.2 million barrel production cut was enough to push the price up by 50 percent. Now we need just to give oil markets some more time to recognise the shortages of supply," said Max Shein, Head of Research at Broker Credit Service. Cuts in oil production have already begun to lay a floor under prices as the US oil price rose to a high of $53.86 on Wednesday, up from $33.55 a barrel on February 12.
However, some analysts said even with Opec cuts, prices would not recover until there was a global economic recovery to boost demand for oil products. "Near term prices will be driven more by the outlook for the economy than by Opec cuts as the oil ministers struggle to react quickly to deteriorating market conditions," said Adam Sieminski, Chief Energy Economist at Deutsche Bank.
Sieminski said by 2011, however, renewed economic growth and a lagging supply response should combine to push prices back up. The consensus forecast for the 2011 US crude price was $80.19. Goldman Sachs decided not to be included in the poll for March but said it would return in Aprils poll. The bank was the most bullish forecaster in 2008, predicting in July prices would average $148 in 2009. However, Goldmans forecasts were gradually reduced. In a Reuters poll taken in February, Goldmans 2009 forecast was $45 for 2009.
Oil prices are not expected to recover sharply as analysts predicted prices would average around $48 a barrel in the second quarter of 2009, for both US crude and Brent. "The risk is that we are facing a leg of medium-term oil price weakness," analysts at Morgan Stanley said in a research note published on March 19.