As oil prices declined to reach a new low in six months, analysts have rated this decline a result of short-term issues and, therefore, predict higher prices in coming weeks.
Oil Analysts have predicted a price hike in near future expecting a rise in demands that might outpace the growth of new deposits. Petroleum prices declined and went below US$ 60 per barrel on an assumption that a govt. report would show the rise in fuel inventories in US.
Edmund Daukoro, Oil Minister of Nigeria and OPEC (Organization of Petroleum Exporting Countries) president, said that the price is indeed much lower as compared to US$ 77 per barrel of oil in July. Oil prices have continually fallen since then and reached its lowest in 6 months. The analysts who were analyzing effects of costly oil prices are now forced to think vice-versa. Oil prices have reached US$ 58.95, lowest since February 17, 2006.
Dougas Morgan, an analyst at Morgan Stanley expects the crude oil outlook to remain favorable as seasonal alteration in oil prices is probably finished. He said uneconomic production shut-ins & turnarounds would probably lower down the supply & would lift spreads for upcoming weeks. Kevin Kerr of MarketWatch had a similar opinion and expected October to be a better month with supplies lowering down from their peak in coming two weeks.
"The recent decline can be attributed to interim issues. Looking at a better industry growth, one can expect prices to increase in 2007 and reach above US$ 75 mark", said an analyst at RNCOS.
It appears that traders are also expecting prices to rise further. However, their expectation could suffer a setback if US economy gets slower which, as per experts, is already witnessing slow growth. If such scenario occurs, one could see decline in oil demands from America as well as nations like China, to which it supplies imports.
Inexpensive prices however, may help to ease off any slowdowns. Firms struggling against higher prices like gas-guzzling vehicle makers will receive a much-needed boost. Also, consumers would feel much relieved if prices continue to fall further. On the whole, more declines would mitigate inflation concerns and therefore, would prevent increase in interest rates.
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