Former US gubmnt advisor Philip Verleger says that falling demand and near capacity storage will force oil prices down, possibly as low as $20/bbl by December. It's hard to believe that forecast when oil prices are hovering around $70/bbl as I write this. Here is his argument:
Of course not everyone agrees with Verleger. From the same source:A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low, said Verleger, who correctly predicted in 2007 that prices were set to exceed $100. Supply is outpacing demand by about 1 million barrels a day, he said.
“The economic situation is not getting better,” Verleger.... “Global refinery runs are going to be much lower in the fall. If the recession continues and it’s a warm winter, it’s going to be devastating."
Oil will average $63.91 in the fourth quarter, according to the median of analyst forecasts compiled by Bloomberg. Crude for December delivery traded at $65.61 today [July 16th] in New York. Prices have rebounded on expectations of a demand recovery, led by China and other developing economies, and concern expansionary monetary policy would stoke inflation and weaken the dollar.
At the other end of the spectrum from Verleger, Goldman Sachs Group Inc. predicted in a report yesterday oil will rally to $85 a barrel by the end of the year, and recommended that clients buy futures contracts for delivery in December 2011.