Oil prices are likely to keep falling until well into next year and could reach $25 a barrel before recovering, US bank Merrill Lynch has said
In a research report published on Thursday, it said oil prices should begin to rally in the second half of 2009. Merrill Lynch recently cut its forecast for the average price of US crude oil futures and North Sea Brent crude oil to $50 a barrel from a previous estimate for both crudes of $90.
"With demand vanishing across all key oil consuming regions, benchmark crude oil prices continue to plummet," it said. "In the short-run, market participants will focus on both Opec and perhaps even non-Opec producer responses to balance the market."
"A temporary drop below $25 is possible if the global recession extends to China and significant non-Opec production cuts are required," it said. "In our view, oil prices could find a trough at the end of Q1 2009 or early Q2 2009 with the seasonal slowdown in demand. Then, as economic activity starts to strengthen, we see oil prices posting a modest recovery in the second half of 2009." Oil prices hit a peak above $147 a barrel in July but have fallen more than $100 since then as the severity of the global economic downturn has become clear. Merrill Lynch said a combination of high oil prices and high leverage had proven dangerous for the global economy.
Author:
Ksenia Kochneva
