Oil is set to hold in its current range this year, although some upward movement could be possible, BP’s chief economist Christof Ruehl said recently.
“We would expect oil prices for the remainder of the year in the current range, perhaps with a slight upwards drift but no dramatic spikes,” Ruehl said in an interview with Reuters Insider television in London. Oil has traded in a relatively tight $15 range between $69-84 per barrel since early October. At the peak of the financial crisis, oil crashed below $40 from a July 2008 record of almost $150, but expectations of an economic recovery have supported prices since then.
Ruehl said the same factors that drove up prices by almost 100% in 2009 – lower OPEC output and the global economic recovery – will support prices in 2010 and set the price floor. He said a strong rebound in demand was not as likely as some commentators think, saying daily consumption growth would be below the average levels of 1.1 million barrels seen in the years before the financial crisis
“We are at the moderate end of that scale,” Ruehl said. “Even if the good years were to return tomorrow it would still take more than three years before we have burned through the excess capacity and back to a market as tight as it was before the crunch in 2008.”