U.S. crude oil was expected to average $74.00 (U.S.) a barrel in 2010, a Reuters poll showed on Monday, as almost one third of analysts surveyed increased their forecasts on the back of a stronger economic outlook.
The poll of 29 analysts showed a higher average oil price forecast for the sixth consecutive month, up from $73.46 in September. In April of this year, the average analyst forecast for 2010 was just $65.95 a barrel.
"Fundamentals for the oil market look better and better with the IMF raising the forecast for global growth in 2010," said Frank Schallenberger, head of commodity research at Landesbank.
The International Monetary Fund met in Istanbul at the beginning of the month and said it expected world output to grow by 3.1 per cent next year, a more upbeat forecast than its prediction of 2.5 per cent growth made in July.
"That means more oil demand in the next year, and that has already become visible in higher forecasts," Mr. Schallenberger said.
U.S. crude is now expected to average $69.73 in the fourth quarter of 2009, up from $68.32 in the last poll.
U.S. crude prices have jumped by almost $10 a barrel in the last two weeks on a combination of positive corporate results and the weak dollar.
Analysts in the latest poll said U.S. crude would average $60.05 a barrel for 2009 as a whole, compared to a forecast of $59.20 in September.
The Organization of the Petroleum Exporting Countries (OPEC) said this month that world demand for its oil would average 28.39 million barrels per day (bpd) next year, up 300,000 bpd from its previous forecast.
The International Energy Agency (IEA) also raised its projection for world oil consumption, joining the U.S. government's Energy Information Administration (EIA) in raising oil demand expectations on signs the economic outlook was improving.
From the second quarter of 2009, oil prices have run a parallel course with global stock market rallies, as risk appetite has re-emerged following the credit crunch, financial crisis and eventual widespread recession. U.S. light crude was trading near $80.15 on Monday, around $2 below the year high of $82.00 a barrel hit last week.
Goldman Sachs said the near 10 per cent jump in prices over the last two weeks was due to a rebound in diesel demand, and backed a view that prices will hit $85 a barrel before 2009 is out.
"All indicators still point to a normal season pick-up in shipping to retailers this year," Goldman Sachs said in a research note.
"Driving this seasonal rise in demand is the pick-up in transportation that is driven by the need to restock finished goods and retail shelves in anticipation of the Christmas retail season that starts in late November."
While some analysts share the view that prices will continue to pick-up in the short-term, many flagged a high risk of a sharp correction in 2010 due to an imbalance in oil's traditional drivers of supply and demand.
The Economist Intelligence Unit (EIU) predicted a Q1 2010 price of $82, but said prices would average $76.50 for the year as a whole due to expectations members of OPEC would probably let compliance with production limits slip.
The EIU also said reduced government stimulus packages next year could see the economic recovery slow.
"As the impact of monetary and fiscal stimulus fades in the second half of next year, we expect renewed weakness in global oil consumption and downward pressure on prices into 2011," analysts at the EIU said.
Weakness in the U.S. dollar has played a role in boosting dollar-denominated commodities like oil as they become cheaper for holders of other currencies. The greenback has fallen to 14-month lows against a basket of currencies and is at around $1.50 against the euro.
Analysts said that if the dollar found its footing in 2010 it was likely to weigh on oil prices, especially if demand remained relatively soft.
"Sooner or later fundamentals will regain a leading role in affecting prices once liquidity of the dollar disappears from the U.S. financial system," said Davide Tabarelli of Nomisma Energia.Report Typo/Error