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Dubai Crude to Stay Around $110 Next Year

Posted August. 30, 2008 03:26,   


Korea National Oil Corp. predicted yesterday that the spot price of Dubai crude oil, the country`s benchmark fuel import, will stay around 110 U.S. dollars per barrel this year and the next.

In an internal report, the state-run corporation said, “Though international oil prices have seen downward pressure, they are unlikely to fall further.”

Given the average price of Dubai crude at 68 dollars per barrel last year, the forecast is seen as a warning that oil prices will not drop soon.

Considering that Dubai crude exceeded 140 dollars per barrel early last month, however, the forecast also means the international oil market has stabilized.

○ Price stability

On international oil prices, the report said, “For a year, international oil prices have jumped a whopping 2.6 times over the past 18 months. Since mid-July, however, they have fallen around 20 percent over a month.”

The corporation cited three factors behind the falling prices: economic slowdown and falling demand in advanced economies; more supply as a result of an increase in Saudi Arabia’s oil production; and flight of speculative money in the wake of the strengthening dollar.

"The oil industry’s grave concern is whether the oil price fall is just temporary or signals a reverse in upward movement of oil price that started in the early 2000s.”

Several energy think tanks and investment banks have released mixed views.

In a report released Thursday, Cambridge Energy Research Associates predicted that oil prices will keep falling and reach 90 dollars per barrel next year.

Goldman Sachs, which had said oil prices would surge to a unprecedented level, said the recent fall in prices is temporary and oil prices will soar to 149 dollars at year`s end.

○ Drastic price fall unlikely

The oil corporation said, “Despite increasing downward pressure, international oil prices are unlikely to fall further since demand generally surges in the fourth quarter and OPEC could cut oil production."

"The price of Dubai crude will stay at 110-120 dollars for the remainder of this year and the annual average price of Dubai crude will be around 110 dollars. The price will not face drastic change in 2009.”

This forecast is in line with that of the Strategy and Finance Ministry, and also suggests inflationary pressure on consumer prices will weaken. A corporation source said, “The majority of our experts believe international oil prices will stay under 110 dollars in 2009. We’ll release our official forecast reflecting our opinion soon.”

Oil prices in Korea have fallen for six consecutive weeks. In the fourth week of August, the average gasoline price dropped 31 won to 1,725.32 won per liter. Diesel oil also fell 43.13 won to 1,688.75 won per liter.

On Thursday, West Texas intermediate crude oil futures fell 2.56 dollars to 115.59 dollars per barrel while North Sea Brent futures decreased 2.05 dollars to 114.17 dollars. For the day, the spot price of Dubai crude grew 0.72 cents to 112.52 dollars.