The recent sharp drop in crude oil prices shouldn't continue, according to oil market expects surveyed by Dow Jones Newswires.
In light of growing concerns about the global economy, the downside risks of the oil price may currently dominate, but there are a number of indicators pointing to higher prices in the long-term, according to market observers.
Also, the Organization of the Petroleum Exporting Countries is expected to attempt to prevent price declines in the short term.
Oil prices slid to their lowest level in a year on Friday, falling again below $80 a barrel. In light of this major decline - oil reached an all-time high of around $150 a barrel just three months ago - those surveyed by Dow Jones Newswires have also drastically lowered their forecasts for prices of Brent and U.S. light, sweet crude for the fourth quarter.
The median forecast for Brent prices in the fourth quarter among the 32 experts surveyed was $87.80 a barrel, down $21.20 from the last survey in mid-September.
Analysts see the price of light, sweet crude falling $20.60 to $89.40 a barrel. For 2009 they see a median Brent price of $92.80 from $105 and light sweet crude at $95 from $103.50.
LBBW analyst Frank Schallenberger and Helen Henton of Standard Chartered Bank both see oil prices bottoming out, particularly in light of surprisingly robust demand from developing countries. Also, "OPEC will likely decide to reduce oil production if prices fall below $80," Schallenberger said. OPEC has called a special meeting Nov. 18.
Jochen Hitzfeld of UniCredit also expects a production cut after the regular OPEC meeting Dec. 17 at the latest. He points to the declining profitability of oil production and falling public revenue of the member states as some of the reasons.
"We're still convinced that raw materials are in a secular upward trend," he said. The oil market is currently in a cyclical downturn, reinforced by the current financial crisis, according to Standard Chartered's Henton. However, "in the long-term, the secular growth in the demand for raw materials is intact in light of the development in India and China."