Commerzbank Analyst Sees Oil Falling Below $60 in 2010

Oil traded Monday afternoon down 85 cents to $72.50 per barrel amid OPEC's December meeting, at which the group is widely expected to maintain a current quota target of 24.845 million barrels per day (bpd). Despite the quota, as has been the case historically when prices were high, OPEC's production has in practice exceeded the quota, this time by about 1.6 million bpd (excluding Iraq) -- which speaks to the lack of discipline Weinberg referred to, also known in oil circles as OPEC members 'cheating' on their production quotas.

Conversely, even with the increased OPEC production, the oil bulls say the fundamentals favor their stance. Ramping oil demand in emerging markets (particularly in Asia), combined with an economic recovery in the energy-hungry United States, and a continued weak dollar, all point to an oil price above $85 in 2010, they argue.

Energy Analysis: The dollar will likely have as much to say about oil prices in 2010 as the strength of the U.S./global economic recoveries. The oil markets are well-supplied and crude should not be trading above $70 given current supply/demand fundamentals. But the weak dollar has supported oil's price. Hence, if the dollar strengthens, that should help counteract the impact of increased global demand -- putting a lid on oil prices. However, should OPEC's modest production discipline deteriorate, the price of oil could drop considerably in 2010.