Oil has dropped 20 percent recently, dipping beneath $65 a barrel, but oil traders don’t believe that slump will continue.
The proof: December 2018 oil futures on the New York Mercantile Exchange recently were above $90. And Bank of America Merrill Lynch sees oil averaging $85 next year.
“The price is holding at decent levels” for delivery in later years, Paul Tosseti, an analyst for PFC Energy consultants, told Bloomberg.
“You need a certain level for all these high-priced resources that are coming on-stream — deepwater Gulf of Mexico, deepwater Brazil and the Canadian oil sands. That’s the dynamic part of the non-OPEC oil supply.”
Futures traders aren’t the only ones expecting long-term price gains.
The U.S. Energy Information Administration forecasts oil will hit $108 by 2020 amid global economic recovery.
Oil recently traded at about $74.
Bank of America Merrill Lynch sees oil near $85 in 2011.
“We expect the market to remain relatively tight on solid emerging market fundamentals in 2011 and beyond, particularly in Asia,” Merrill’s head of commodity research Francisco Blanch wrote in a report, according to Bloomberg.
Short-term factors like Europe’s debt crisis won’t affect oil for long, Mike Wittner, head oil market research at Societe Generale, told Bloomberg.
Still, some experts see oil’s weakness continuing for a while.
“There is very little indication that the bearish market psychology is about to change any time soon," MF Global analyst Edward Meir, told Reuters.
"Until signs emerge that things are stabilizing in the debt markets, we suspect rallies will continue to be vulnerable."
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