Forecasters polled by Reuters revised down their expectations of the average oil price for this year for the fourth consecutive month. US crude oil was expected to average $78.63 a barrel in 2010, a Reuters poll of 31 analysts, banks and government agencies showed, more than one dollar below the July prediction.
The poll showed an average $83.84 a barrel for US crude in 2011, down from the July prediction of $84.63. "Even if a down cycle temporarily sends oil below $65/bbl, the upward trend in the USD size of key emerging economies should support prices next year," said commodity strategist Francisco Blanch at Bank of America Merrill Lynch in New York.
The price of US crude futures, also known as WTI, has fallen by around 13 percent since touching a three-month high at $82.97 earlier in August, buffeted by swollen inventories, flaccid demand and limp economic data.
"A near-term recovery is more than likely to be a shallow one, and the potential for oil prices to trade in a $65-$78 range is highly probable into the remainder of the year," said Daniel Hwang, senior market strategist at Gain Capital Forex.com. US jobless claims hit a nine-month high in August, and uncertainty about GDP growth going forward remains.
Oil refiners have felt the effect of lower demand for motor fuel, hitting the crack spread, or premium, between feed stock crude and the higher priced gasoline they produce.
"More concerning for oil prices are the gasoline crack spreads, which have fallen heavily during the past month," said Thorbjorn Bak Jensen at Global Risk Management in Copenhagen.
The crack spread for September RBOB gasoline against crude oil, which measures the profitability for refiners to make fuel, hit a low of $4.07 a barrel this week, the lowest since November 16, 2009.
Traders traced the volatility of the spread to continuing weak demand even as supplies remain relatively high ahead of an expected post-driving season price fall in the United States.
US light crude was trading around $72 on Wednesday.
US crude was expected to average $77.22 in the third quarter of 2010, down slightly from $77.26 in the last poll.
"We look for Q3 set-backs in commodity prices on fears over global growth," said Christin Tuxen, senior analyst at Danske Markets, which dropped its third quarter US crude forecast to $74 from $80 in the last poll.
"The oil forecast is taken down a little as only a small market deficit will likely be seen this year, but prices should edge higher as year-end approaches and the sustainability of growth is confirmed," Tuxen said.
US crude prices this year have risen to trade as high as $87.15 in April, and have fallen as low as $64.24 in May. US crude and oil products inventories in August rose to their highest level since weekly records began in 1990, with analysts saying in a poll this week that stocks rose on a decline in refinery utilisation.
"Oil balances have weakened since last month, and we now expect a very limited draw in world oil stocks in 3Q10 and 4Q10," said Christopher Barret at Credit Agricole-CIB in London.
"As a result, refining margins should be under pressure in the coming weeks, reducing crude runs and maintaining WTI prices in the $70 to $80 area," Barret said.