Bloomberg cited Morgan Stanley as saying that crude oil in New York will average USD 35 per barrel in 2009 as the global economy contracts, limiting demand for fuels.

The price of West Texas intermediate crude, the basis for futures traded on the NYMEX, will fall to a low of USD 25 per barrel in the second quarter.

According to a report by Morgan’s analysts led by Mr Hussein Allidina, crude will rise to average USD 55 per barrel in 2010 and USD 85 per barrel in 2011.

The analysts said that “We think that the oil markets are lagging the macroeconomists in understanding the severity of the economic outlook. As they catch up, and as the full extent of the demand weakness becomes clear, we expect prices to move lower.”

The analysts noted that the recession in developed economies, combined with slowing emerging markets such as China and India, will cause oil demand to fall by 1.5 million barrels per day in 2009.
They said that “Recent data refute notions of decoupling and the inevitability of non OECD oil demand growth. Economic data point to weakness in Asia meeting or exceeding 1997 levels, when regional oil demand contracted by 2%.”

Morgan Stanley’s outlook for West Texas oil is the lowest of 35 analysts’ forecasts.

(Sourced from Bloomberg)