Crude Oil Price is Stuck Around $67/barrel

Crude oil market pricing is adopting a bearish tone from high inventories and still-weak demand. Spot prices of West Texas Intermediate (WTI) are around $67/barrel this week and futures are trading on the New York Mercantile Exchange at that level through January. But, there is a chance they could deteriorate in coming weeks.

"Energy's fundamentals still are uninspiring with a fundamental market backdrop typified by sluggish end-user demand, rising stocks, and poor OPEC compliance," writes analyst Ed Meir at MF Global in New York, noting that the Organization of Petroleum Exporting Countries cartel continues to pump oil above its own quotas. "So, prices should remain confined to the $65-$75 trading range for some time to come. Saudi Arabian Oil Minister Ali al-Naimi tells Reuters that $75 a barrel was "a fair price for oil" and he sees no need for OPEC to change production ahead of the group's next meeting in December. "We believe that around $75 (a barrel) is a fair price for both producer and consumer," Naimi says. 

So far this year, WTI is averaging $56/barrel and the Energy Information Administration (EIA) has forecast $60 for this year-and $72 in 2010. However, a Reuters poll of 36 analysts is bearish and sees WTI averaging $59 next year. Goldman Sachs Group disagrees, suggesting crude oil prices are likely to be higher in the future due to a recovery in demand and a decline in production. 

Global demand is still very weak so that, when inventories reach record levels, oil prices will be pressured downward, says economist John Mothersole at the IHS Global Insights office in Washington.

Near-term prices also could slide since the American Petroleum Institute's report shows that crude oil stocks shot up 2.8 million barrels in the week ended Sept. 25 to 340 million barrels, substantially more than forecast. Distillate supplies, which include heating oil and diesel fuel, jumped 2.3 million barrels, also ahead of estimates, to 170.7 million barrels. Gasoline stocks fell 1.7 million barrels to 212.5 million barrels.

quoted from: Purchasing.com