Will oil trade at $20 per barrel this year?

Posted Jul 16th 2009 2:00PM by Connie Madon
Filed under: International Markets, Forecasts, Market Matters, Commodities, Oil, Recession

Here's a forecast that will knock your socks off. Professor Philip Verleger from the University of Calgary is predicting that oil will drop to $20 per barrel this year. This price was last seen in 2002.

He states that a surplus of 100 million barrels will accumulate by the end of the year.

Concerning the economy he said: "The economic situation is not getting better. Global refinery runs are going to be much lower in the fall. If the recession continues and its a warm winter, its going to be devastating."

While Mr. Verleger is predicting a collapse in oil prices, oil analysts forecasts compiled by Bloomberg are forecasting $63.91 per barrel on average for the fourth quarter.

The price of forward contracts are higher than spot prices, encouraging buyers to buy nearby contracts. This is called a contango. This may end when storage gets tighter and more expensive.

In Mr. Verleger's view, the recession is not ending. US consumers are buying less, and developing countries like China are producing less. Thus, we will have less demand for oil.

We have had a big incentive to build oil inventories but this can only continue up to a point. Then storage will get so tight that there will be a glut of oil.

Whether or not you agree with Mr. Verleger is open for debate. Every once in a while a voice cries out in the wilderness: "be careful," a change is coming.

Do you believe that the price of oil will drop to $20.00 per barrel?

Tags: inthenews, oil, oil prices, OilPrices, Philip Verlager, PhilipVerlager

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Reader Comments (Page 1 of 1)

7-17-2009 @ 10:53AM

Roman said...

By the end of the summer/hurricane season, the price of crude oil will fall to 30 dollars a barrel. The economic conditions that are affecting the US are also affecting China and India. Like the U.S., China and India’s need for oil has stagnated and decreased due to the recession. I predict, the price of crude oil will fall to 30 dollars per barrel by Thanksgiving, and then will start to rise. Eventually the price of Oil will go up due to the rise of larger middle class throughout the world, which will increase the demand for oil. Hopefully by this point we all will have flying Deloreans, which can be powered by garbage.

7-16-2009 @ 2:36PM

Michael R. said...

Oil won't make it below $40 before another OPEC production cut would be put in place. I mean get real.
If natural gas had a cartel agreement as such it would not be suffering thru this price destruction of their own making.

7-16-2009 @ 2:57PM

octingenti said...

China is making two deals with Iran... China offered $40-Billions to build more refineries in Iran to boost Iran's gasoline and kerosene refining capacity... And the second Iran/China deal: China offering additional $70-Billions to drill oil on Iran's soil... And Iran is jumping with a BIG GIGANTIC smiles of JOY...

Talk about additional sanctions on Iran... With that kind of China/Iran deal, any additional sanctions are nothing but "FUTILE."

While the corrupt and GREEDY America is busy robbing its own people with manipulated oil-&-fuel price and busy waging wars and making enemies around the globe, China is busy moving of becoming the WEALTHIEST country of the world by making friends with oil-rich countries who despises and vile enemies of America...

China is the SNEAKY doubled faced CLEVER SNAKE here, likened to their famous symbol, the "DRAGON."