Wednesday, July 15, 2009

Morgan Stanley Raises 2010 Oil Forecast to $85 (Update2)

By Christian Schmollinger and Dinakar Sethuraman

July 14 (Bloomberg) -- Crude oil traded in New York will average $85 a barrel in 2010, Morgan Stanley said, 31 percent higher than its previous estimate of $65 a barrel, as demand recovers and supplies decline.

Commodities will rise as investors’ appetite for risk revives along with the global economy, Morgan Stanley analysts, led by Hussein Allidina, said in a report yesterday. At the same time, oil production will drop as much as 6.3 percent a year among suppliers outside the Organization of Petroleum Exporting Countries and by 3.5 percent within the group, the bank said.

Oil demand is expected to rise 1.4 million barrels a day, or 1.7 percent, in 2010, led by emerging markets outside the Organization for Economic Cooperation and Development, the International Energy Agency said on July 10. Crude prices have climbed 35 percent this year on optimism that government stimulus will overcome the worst recession in six decades.

“Global demand will likely increase as the economy recovers into 2010, while supply has reached a plateau,” the Morgan Stanley analysts said. “As green shoots take root, investors will position for improving growth, which will contribute to a softer U.S. dollar, at the same time that oil market fundamentals start to improve, providing a power lift to oil prices.”

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