INTERNATIONAL. Crude oil traded around US$47 a barrel on Friday for a fourth weekly gain, as OPEC prepared to meet Sunday to consider a cut in output.

The 12 members of OPEC, which supplies about 40% of the world’s oil, will assess compliance with production cutbacks set last year and consider whether more reductions are needed. Oil traded in New York has fallen more than US$100 from a July record of US$147.27 a barrel as the global recession curbs consumption.

Crude oil may rise next week on speculation that OPEC will agree to a reduction in supply at a weekend conference, according to a survey by Bloomberg News.

Fifteen of 35 analysts surveyed, or 43%, said futures will increase through 20 March. Thirteen respondents, or 37%, forecast oil prices will decline and seven said there will be little change. Last week, 50% of analysts expected prices would rise.

While many analysts expect oil demand to rebound sharply once the economy recovers, not everyone agrees that prices are necessarily going to soar at that point.

One of the biggest uncertainties is whether today’s market will mirror the early 1980s, when prices collapsed and stayed low for much of the next two decades, or whether it will prove more like 1998, when prices fell to US$10 a barrel after the Asian financial crisis but rebounded within a few years as growth picked up, The New York Times reported.

Nouriel Roubini, a professor at the Stern Business School at New York University and chairman of Roubini Global Economics (RGE), who predicted the current financial crisis two years ago, told the NYT: “The twin engines of growth are the US. and China; the US has fallen off and China has stalled, to put it mildly. In my scenario, oil will fall lower. I would not be surprised if oil even went to $20, if the recession is more severe.”

Edward L. Morse, the chief economist at the New York broker LCM Commodities, says that each energy shock in the last 60 years resulted in lower growth for oil demand in succeeding years.

This time, he said, should be no different. “The case is overpowering,” Morse told The Times, estimating that in the next recovery, global oil demand will grow perhaps 1% a year, because of lower demand growth in the US, China and the Middle East.
 

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