Banks see further rise in oil price

NEW YORK - ING and Deutsche Bank joined several peers in raising their crude price forecasts on Friday, with a growing number of major banks saying prices have room to rise as supplies tighten.

Analysts are calling for oil prices to gain more than previously expected over the next few years, including several forecasts for them to top $100 a barrel.


At least five major banks increased their mid- or long-term outlook for oil prices this week, citing factors such as booming demand in emerging markets, faster global economic growth, and OPEC's reluctance to boost output despite declining inventory levels in slower-growing OECD economies.

Some bullish forecasts see oil prices staying near a 25-month high above $89 a barrel reached on Friday in the near term, but rising further into the future.

Fuel demand continues to surge in China, US oil stock levels fell from record highs earlier this year, and refined product prices are surging in Europe - with gasoline at two-year highs - on tighter supplies.

ING analysts forecast on Friday that oil may trade in "a new higher price range" between $80 and $100 a barrel going forward, up from the $70 to $85 a barrel range that has applied during most of 2010.

Deutsche Bank said a global demand recovery and a dip in OECD inventories led the bank to raise its average price forecast for next year to $87.50 a barrel, a 9 percent increase from a previous forecast of $80 a barrel. The bank kept its $100 a barrel outlook for oil prices in 2015.

JP Morgan analysts said on Friday they see prices at higher levels still, with NYMEX crude likely to average $93 a barrel next year, up from a previous forecast of $89.75.

The bank sees crude rising as high as $120 a barrel by the end of 2012.

European benchmark Brent, which traded near $91 a barrel on Friday, should average $95 a barrel next year, up from an earlier forecast of $92, and should average $105 a barrel by 2012. JP Morgan also called for the Brent futures curve to be in backwardation next year.

OPEC members may have to boost output next year to meet world demand, but that is unlikely to keep oil from temporarily rising to $100 or above at times in the first half of 2011, JP Morgan said, and OPEC is seeking more revenue from its oil.

"If the world economy can bear it, (OPEC) will allow the acceptable price range to step up both in 2011 and 2012," the analysts wrote.

Goldman Sachs on Wednesday boosted its US crude price outlook to an average of $110 a barrel in 2012, but kept its call for $100 a barrel average NYMEX oil prices next year. The bullish calls came as the US bank said "better prospects for continued robust world economic growth" would spur higher demand.

On Tuesday, Societe Generale raised its average 2011 price forecast for Brent futures to $93 a barrel, an $8 jump from its previous call. The bank expects US crude futures to average $92.50 a barrel next year.

The bullish outlook came after "global oil demand growth for this year has been revised up sharply to 2.4 million barrels per day (bpd) from 1.8 million bpd previously, mainly due to an unexpected surge in third-quarter 2010 OECD demand."

"We forecast bullish stock draws for next year, driven by stronger demand," Societe Generale analysts wrote.

In boosting its price forecasts for next year, SocGen analysts warned the rise could push oil's percentage of world gross domestic product up to proportions last seen during the global oil shocks of the 1970s.
(Reuters), 4 Dec 2010