Oil prices tipped to stay low

14 August 2009

Oil prices are unlikely to exceed $85 (£51.38) a barrel in the coming months, even as the world economy begins to recover from the effects of the financial crisis, it has been claimed.

According to Reuters, oil analyst Ed Morse expects values to remain fairly stable, with rising output capacity and weakened demand set to limit any potential increase.

In the next issue of Foreign Affairs, Mr Morse writes that over the past 60 years, every spike in the market has always been followed by a downturn in consumption.

With prices having soared to a record $147 last summer, the subsequent lack of demand and continued growth of supplies means values are set to remain fairly stable, he stated.

"There are good reasons to believe that lower prices are here to stay for a while," Mr Morse wrote.

"Last year's high prices and the recession have severely damped demand."

While this may come as welcome news for home heating oil customers, Mr Morse's forecast differs greatly to the view of many analysts, who expect consumption to bounce back after the recession and push values higher.

Indeed, according to Iraq's Opec governor Mohammad Ali Khatibi, prices could reach as much as $80 a barrel by January.

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