The US investment bank Merrill lynch has said oil prices can slump to USD 25 a barrel next year before recovering in the second half of 2009. "With demand vanishing across all key oil consuming regions, benchmark crude oil prices continue to plummet," said Merrill Lynch. The new estimate was based on a global GDP growth forecast of 1.3% for next year, compared with 3% expected by Merrill Lynch economists in October, a scenario consistent with a global recession, they said.
The news came as the International Energy Agency cut its forecast for world oil demand in the next five years. The Paris-based agency had previously predicted 350,000 barrels a day. However, the agency said today that oil demand was expected to grow by just 220,000 barrels a day next year. The Paris-based agency, which advises 28 industrialized countries, also expects new investment in oil refineries to boost crude distillation capacity in the next five years at a faster pace than growth in demand. "Then, as economic activity starts to strengthen, we see oil prices posting a modest recovery in the second half of 2009.
It said the main downside risk to its estimates is the Chinese economy. Its economists currently forecast 8.6% growth for the world's second-largest economy next year. "In the short run, global oil demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations," Merrill Lynch said. "We now expect an outright contraction in global oil demand in 2009."
The news came as the International Energy Agency cut its forecast for world oil demand in the next five years. The Paris-based agency had previously predicted 350,000 barrels a day. However, the agency said today that oil demand was expected to grow by just 220,000 barrels a day next year. The Paris-based agency, which advises 28 industrialized countries, also expects new investment in oil refineries to boost crude distillation capacity in the next five years at a faster pace than growth in demand. "Then, as economic activity starts to strengthen, we see oil prices posting a modest recovery in the second half of 2009.
It said the main downside risk to its estimates is the Chinese economy. Its economists currently forecast 8.6% growth for the world's second-largest economy next year. "In the short run, global oil demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations," Merrill Lynch said. "We now expect an outright contraction in global oil demand in 2009."
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