Outlook 2009: oil prices average $60b
􀂄 A sluggish recovery in the second half
In line with our macro-economic view oil markets will likely turn the corner only
in the second half of next year and only gradually at that. Until then we see oil
demand weakness reminiscent of the early 1980s in developed economies and very
sharply reduced growth, if there’s growth at all, across the diversified group of
emerging economies. Supply responses are still weak and will take time to work.
Quarterly average oil prices for Brent futures will likely hit a low of $50b in Q2. .
􀂄 Supply, demand and politics
Politics will play a larger and more visible role in oil market trends and
developments next year. Key choices will range from supply side decisions (when
to start cutting production aggressively, or how to deal with instability) to policy
response on the macro level in the bigger economies. But also expect policy
changes affecting medium and long term oil demand growth. .
􀂄 What may surprise on the upside or downside?
The macro environment might turn out worse. Oil prices would then gravitate
toward cash-operating costs, near $30b for the integrated segment, before inching
higher to average $50b next year. Conversely, if policy responses resuscitate
growth quicker and supplies fall faster as well, prices could average $80b. .
􀂄 More supply growth will be needed before long
Our medium-term view of oil fundamentals still involves too little supply growth.