Oil price will hit $56 in second half of 2009 - analyst

PRICE RECOVERY: Oil price will rise steadily, according to Merrill Lynch commodities expert. (Getty Images)

Oil prices will climb steadily to reach an average of $56 a barrel in the second half of 2009 as demand from developed economies recovers slowly, the head of global commodity research at Banc of America Securities-Merrill Lynch said on Monday.

But it would take two or three years for crude prices to reach $80 or $90, Francisco Blanch said in an interview with Arabian Business.

“Prices are stabilising and will start picking up. I think it will be more of a steady upward push than a super-spike," he said.

“OPEC spare productive capacity is a lot greater so we have a lot more cushion to deal with unexpected demand conditions.  We also have a lot more refining capacity coming online.”

He said the recovery in demand would be limited in the next few quarters as growth in the developed economies would be very “subdued.”

OPEC had reacted very quickly in a coordinated fashion to a “massive demand stroke” by cutting oil production, contributing to a balancing of the market and ensuring inventories were no longer building as fast as three or four months ago, Blanch said.

The current price of crude is around $46 a barrel, a long way short of the highs of $147 in July 2008.

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