Oil prices surge: What lies ahead

MUMBAI: Global oil demand is expected to around 86.2 million barrels per day (bpd) in 2009, rising just from 86.5 million bpd in 2008.

The Organisation of Petroleum Exporting Countries (OPEC), which agreed to cut output by 1.5 million bpd from November, is set to meet in Cairo on November 29.

Analysts are expecting a further cut at this meet.

Oil: Downside Continues

• Oil prices fell for the fifth straight session to below $53/bbl
• Prices dropped after US crude inventories climbed twice as much as expected
• US light crude for December delivery due to expire later on Thrusday
• US crude December settled lowest since Jan 22, 2007
• Total product demand fell by 7% against a year ago
• Oil has shed almost two thirds of value since July record of $147/bbl
• OPEC calls for informal talks in Cairo on Nov 29 on further supply cuts

 Crude Oil: What Future data Indicates

• Oil contracts for far delivery have been above $80/bbl
• Long-term prices show long-term trend towards higher prices intact
• Back end of oil futures curve reflecting long-term trend, not in short term cycle
• Long dated prices have fallen but less faster the prompt prices
• Oil prices moving close to what is widely considered to be average operating cost or “cash cost”
• Analysts believe cash cost of oil around $50/bbl

 Crude Oil: Reuters Pol

• Most analysts see prices recovering fairly quickly in the next few months
• Poll indicates WTI next year of $81.30/bbl and $90/bbl in 2010
• US crude recovering to average $78/bbl in Q4, bouncing back to more than $105/bbl in 2010