Where Will Oil End 2009?

Is 2009 going to be an exciting year for oil? Institutional investors don`t think so. Their estimates are very similar - much of Wall Street expects oil prices to average about $50 a barrel in 2009. Some of the firms and their specific forecasts:

Deutsche Bank predicts an average price of $47.50 for all of 2009; the chief energy economist of Deutsche Bank, Adam Sieminski, said recently that the demand for oil in 2009 will drop more than any other time in the last quarter of a century due to the weak economy. Sieminski forecasts oil traded in New York falling as low as $30 and averaging $47.50 for the whole year.

Merrill Lynch has a very similar prediction, saying that prices will average $50 (but iif they could predict anything they would have remained independent...).

Moody’s Investors Service also says crude will average $50 a barrel in 2009.

Goldman Sachs is predicting that prices will average $45 for all of this year – but predict a a drop to $30 dolars a barrel in the first quarter. Yet Goldman just five months ago predicted oil prices would hit $200 a barrel in 2009.

Marc Faber doesn`t make any specific price prediction, but is buying oil at these prices.

The Energy Information Administration projects crude oil will trade at an average of $51 a barrel in 2009.

Barclays Capital has given its forecast of $76 a barrel average for U.S. crude in 2009, saying improving demand and a supply slide will combine to lift oil prices. The forecast is more than $17 above a consensus $58.48 dollars a barrel in the most recent Reuters poll and was among the highest in the survey of 30 analysts.

Morgan Stanley predicts $82 for 2009. Morgan Stanley is the most bullish investment house on the Street.

Jim Rogers says that oil will reach $200 a barrel by 2013.

Bloomberg Consensus: Oil futures may rebound from their worst year to average $60 a barrel next year. The forecast is the median of 33 analysts compiled by Bloomberg.

The Oil Traders Blog price projection for the end of 2009 is $60 to $70 a barrel, based on a sample of 350 retail investors.

I predict 85 dollars a barrel for the end of 2009. Most of the move will be a direct consequence of the money printing scheme the Fed put on, which caused the dollar to fall. Demand will remain weak, which can depress prices in Q1 and Q2, but it will surely rebound later in the year.

Comments

[jmlopes:]

Simoes: Tell me something. Why would anyone believe the safe haven is oil as our dollar falls? Wouldn't gold step up to the plate considering not only is it in short supply, the CBs stop selling, and in fact are in the market buying- what gives?

Personally I think OIL will get trashed in 2009 simply because it is the only stimulus or ease the consumer will get seeing as tax breaks for the middle class aren't forthcoming.

Cheers

Jan 04 07:45 AM

[Ferdinand E...:]

What will happen to the price of oil depends to a considerable extent on the international macroeconomy, but I don't see why OPEC would allow the price of oil to go under $40/b. Why should they? Accordingly, I will take the advice of Marc Faber and tell anyone who asks me to buy oil when the price is in the $40-45/b range - or at least to think very strongly about buying it.

Jan 04 08:13 AM

[bsharvy:]

1) Oil isn't a safe haven, it is priced in dollars, so when the dollar falls, oil gets more expensive.
2) OPEC doesn't doesn't have the power to allow or disallow any oil price.

Jan 04 08:30 AM

[whisperonth...:]

If our new president can turn the economy around - and the jury is still out on if, when, how - people will start to feel good about everything again, and they will start to spend money faster. This will not only improve all the financial aspects even more, it will mean people start traveling more, driving more, and that means more oil. Yes, we need alternatives to oil, but no one has come up with an affordable replacement for gasoline and so far we can't seem to reproduce it cheaply, if at all. Therefore, if Lord Obama can do his turnaround thing, the price of oil will eventually come back up too. And if he taxes the big oil companies and places restrictions on them, you can bet the price of oil will go even higher because WE pay those taxes in higher prices, and we pay for those restrictions. Yes, it's nice to fill up for under $20, but in order to get that, I watched my IRA take a dive. Even with investments in funds, those funds invested in oil also. So now I'll invest in oil while it's low, and it will go up again. Maybe someday we'll have a replacement but we use it in too many things to expect that oil won't always be a factor - at least in the next 50 years or so. (And by then, maybe they'll figure out something else.)

Jan 04 09:37 AM

[LuckyPierre:]

Predicting the weather at year end is likely to be more accurate than predicting the price of oil 12 months from now. Considering the "survey of 30 or 33 analysts" statement: What was their range of predictions and individual margin of error? and what's been their track record in their past predicting anything 12 months out?Taleb (The Black Swan) would have a field day with those predictions.

Jan 04 10:38 AM

[NOWHEREMAN:]

As long as oil usage remains below production, the trend is for low oil prices. Therefore, oil prices will remain low but should stabilize when equilibrium is reached.

The real question then is have the World's economies stopped contracting? I posit that conditions continue to worsen.

I also believe that $40 oil will eventually be $80 then $160 then who knows. Timing then is the issue.

I've held my CanRoys for 6 years, and will hold them until they are either bought out or become full fledged corporations with tremendous assets. Get paid while you wait. The world will recover. Timing is not an issue when the payouts will last at least 2 more years.

I Expect oil will be much, much higher by 2011. Get paid while you wait even if it takes another 18 months to double.

IMO

Jan 04 10:47 AM

[scotty1560:]

oil...gold...if only I knew the trend...crystal ball says...

It wouldn't take much to see it at $60, geopolitical hard talk or war drums...a nasty little hurricane next September....a few extra miles driven courtesy of lower pump prices....I say bottom is in for now...it's in rally mode..

If economy tanks again next summer then wagers are off..we start talking mild depression scenario....hope not..

Jan 04 11:43 AM

[polishlogician:]

...does anyone have an opinion on what Obama's strategy for petrodollars is going to be? That is, will he cozy up to Chavez and allow him to skirt the World Bank, as part of renewed Latin American relations; will he favor a range of oil to trade only in a band, say $50-60/bbl like Clinton to appease OPEC, Russia; or will he favor lower oil across the board if only in the short-term as a means towards stimulus (I wouldn't say long term as I personally think he'd have to help prop up the price by the end of the year)?

Jan 04 02:47 PM

[henarl:]

Moody's predicts $50 oil. Is that with or without one of their great AAA ratings ?

Jan 04 03:23 PM

[Joenobody09:]

Oil better goes up or the Arabs will have no money to buy our treasury notes and where would we be then ? Uncle Sam may do something to get the price of oil up - like encourage Israel bombing Iran. That should getthe price of oil up.

Jan 04 03:24 PM

[User 283977:]

Prediction of the price of oil one year in advance is similar to playing roulette. I am currently at the point where I trust no prognostications from so called "professional" analysts With respect to Goldman Sachs and Moody's, I would bet that what ever they say will 1) be inaccurate, and 2) somehow self serving.

The better question is will investments made in oil in late 2008 be profitable in late 2009? I believe large cap oil dividends are a pretty safe bet for 2009. I purchase stocks on speculation, but I don't speculate in oil. Too many sharks, barracudas and piranhas in the water.

Jan 04 04:23 PM

[oiler1930:]

Any prediction for oilprices will be part of a shotgun pattern. ;; Lifting costs have to be exceeded or the marginal producers will drop out, and thereby reduce supply.

Jan 04 08:17 PM

[toobad41:]

It is interesting to note that Global oil production has been basically flat since May, 2005. Demand is increasing at an annual rate of 1.8%, however production is expected to decline at about 3% (or as high as 4.5%) per year. That is mother nature, not market theory. Today demand is down because of the world wide economical situation. That won't last. Now to get to my point. There is a 50% probability that the mean oil price for 2009 will be $70 a barrel and 75% probability that it will be below $85 a barrel.

Jan 05 07:16 AM