Nymex crude for delivery in February was priced $77.25 a barrel. (EB FILE)
The demand for oil is expected to rise to 85.1 million barrels a day in 2010 even as the average price, as a result, is expected to be $85 a barrel, said analysts.
Francisco Blanch, the Merrill Lynch commodities analyst famed for having correctly predicted the $147 a barrel price of oil in July 2008, raised his 2010 WTI forecasts up from $75 a barrel to $85 a barrel.
Nymex crude for delivery in February was priced $77.25 a barrel yesterday up 1.41 per cent from previous day's close.
"As we have been flagging for some time, the combination of tighter physical oil supply and demand fundamentals, loose monetary policy, and a weaker dollar are creating a growing risk for oil prices to spike above $100 a barrel as we head into 2011. Given the stronger-than-expected cyclical rebound, we are revising our WTI and Brent crude oil price forecasts up to $85 a barrel, from $75 a barrel," Blanch wrote in his recent report.
A higher oil price that major the consumers are comfortable with is working well in favour of oil producers of the GCC. Kuwait may earn a budget surplus of an amount ranging between KD5.3 billion (Dh67.72bn) to KD6.6bn in the financial year 2009-2010 on the back of higher- than-expected oil prices, the National Bank of Kuwait (NBK) said in its report titled 'Oil market and budget developments'.
While oil prices have rallied in the past few days, factors that are known to support oil prices are still absent. Opec decided to let oil output remain unchanged in its 155th meeting that was held in Luanda Angola this month. Even though Opec has avoided inflicting any impact on oil production and therefore prices; news is not good as far as compliance to Opec's dictates are concerned. Compliance to quotas fixed by the Opec is considered to be as low as 60 per cent in cases of countries such as Iran and Venezuela.
Other factors that are working against the oil prices currently include a warmer winter in OECD countries and strong inventory levels across the world.
Analysts agree that the latest support for crude prices has come from this week's Opec meeting that decided to leave oil output levels unchanged. "No one is reducing consumption because prices are high," said an oil economist at Dubai International Financial Centre.
