US crude oil is expected to rise to an average of $78.91 a barrel in 2010, a Reuters poll showed on Thursday, and analysts said medium-term economic improvement could spur investment in oil, sending prices higher. The poll of 32 analysts showed a rising consensus forecast for the eleventh consecutive month. In April of last year, the average forecast for 2010 was $65.95 a barrel. In February analysts forecast a year-end price of $77.70.
"As demand for gasoline rises this summer, and investors see oil as an attractive medium-term economic macro play, crude prices could move higher than we are currently forecasting," said Jason Schenker at Prestige Economics in Austin, Texas. Analysts said a high number of refinery outages in March and April would drop in April and May, and that economic recovery in China and the United states would continue to increase oil demand.
"What we suspect is that the upper-end of the price band has moved to an $85 comfort zone, but that could mean short term blips to $90," said Lawrence Eagles at J.P. Morgan. "Later in the year, our price target of $90 means intraday blips to $100 are not impossible."
US crude is expected to average $78.01 in the first quarter of 2010, up from $75.70 in the last poll. US crude prices have risen as high as $83.16 in intra-day trading in March from a low of $78.06 at the beginning of the month. Oil briefly dipped below $70 a barrel in February.
"The recent stabilisation and in some instances return to growth have been dependent on unprecedented monetary and fiscal stimulus. These policy interventions are responsible for the current strength in prices," said Thorsten Fischer at RBS. "In other words, we believe that the strength in crude oil, and commodities more generally, at present can be attributed more to demand for commodities as an asset class rather than to demand for the underlying physical commodity," Fischer said.
Last week the World Bank raised its 2010 GDP growth forecast for China, revising its projection to 9.5 percent from 8.7 percent from its last report in November. US gasoline demand in 2010 is expected to show modest but consistent increases, with the Energy Information Administration calling for 60,000 barrels per day growth to 9.1 million bpd. In 2011, demand is forecast to rise by 70,000 bpd to 9.1 million bpd.
Earlier this month the International Energy Agency (IEA) said global oil demand in 2010 would rise by 1.57 million bpd, unchanged from its previous forecast. "There is still uncertainty about when the OECD will see a strong recovery in oil demand," said Harry Tchilinguirian at BNP Paribas. "The economies of the group's largest consumers still face the headwinds of tight credit and high unemployment. Consequently, Western refiners have been running at low utilisation rates."
The IEA, a Paris-based adviser to 28 industrialised economies, said global oil processing, led partly by higher run rates in Chinese and other Asian refineries, would rise by 50,000 bpd in the second quarter compared with January-March. A separate Reuters poll of top oil-tracking analysts this month showed non-Opec production will rise by 300,000 bpd in 2010, and the market will likely be in surplus for the year.