New Delhi: Global investment banks Merrill Lynch and Goldman Sachs, which had earlier this year forecast oil prices would surge to $200 per barrel level, now foresee it slipping to $25-30 level, while Indian analysts anticipate a strong resistance at $40.
After hitting a peak of over $147 in July this year, crude oil prices have declined sharply and are currently trading near $45 level.
Goldman Sachs’ commodity research team in its latest research note has predicted that the oil price might slip to $30 per barrel level in the next three months.
Meanwhile, the firm’s energy equity research team, led by Arjun Murti, said in another report that it is cutting its forecast for 2009 to $45, from $80 previously, due to global economic slowdown.
Murti, who is known as ‘oil guru’, had shot to fame for rightly predicting a spike in the price to USD 100 when it was trading at around $40 level. Later in May, Murti forecast a spike to $150-200 level in the next 6-24 months.
In an interview with the stock market weekly Barron’s in June, when oil price were hovering at about $135, Murti had said that oil prices might fall below $75, but after 20 years.
The latest report from Murti’s team has, however, said that there was a possibility of prices falling below $40 level shortly.
Indian analysts, however, see a strong resistance to the oil prices slipping below $40 level and do not foresee any possibility of $25-30 level.
“Crude oil prices may not fall below $40 a barrel. Rather it will consolidate at $40 a barrel level,” Kotak Commodoties Vice President Si Kannan said.
Opec meeting which is scheduled in the coming week may cut production further and this will consolidate prices,“ Kannan added.
“Crude oil will have good support at $40 per barrel. I doubt if it falls to $30 per barrel in the short-term,” Religare Commodities Business Head Jayant Manglik said.
Earlier last week, Merrill Lynch had warned that oil price could fall to as low as $25 if economic recession in the US, Europe and Japan spreads to China.
Merrill Lynch currently forecasts an average price of $50 for 2009.
The Goldman Sachs report from the Murti-led team noted that the global credit crunch could push oil prices below $40 level as the impact of the global economic recession had swung the oil market from “pricing demand destruction in 2008 to pricing supply destruction in 2009.”
The energy equity team of Goldman Sachs said that oil prices were likely to bottom out in the first quarter of 2009. It further noted that a recovery was expected after that and oil markets would not see “a decade-plus period of weakness like seen in 1980s and 1990s.”
At the same time, Goldman Sachs’ commodities research team, led by Jeffrey Currie, noted that oil price could claw back to $42 by June and then to $65 by December of 2009 — after a fall to $30 in first quarter — thus keeping the average for the year at about $45.