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Crude oil prices predictions say today's levels to linger
SUPPLY AND DEMANDRECESSION BLAMED FOR HOLDING MARKET DOWN

Debbie Blossom, Business Writer Comments 2
Published: July 11, 2009

A year ago, crude oil prices peaked at $147.50 a barrel and Oklahoma motorists were paying an average $3.92 for a gallon of regular gasoline.

Now oil prices are less than $60 a barrel and local industry experts say they may not rise much higher the rest of the year as demand continues to drop right along with pessimism about the economy.

Industry observers won’t say what’s the ideal price for crude that benefits consumers most, but lower oil prices translate into cheaper gas for motorists to fill their vehicles.

Crude oil prices Friday settled at $59.89 a barrel on the New York Mercantile Exchange, but at one pointed traded as low as $58.72.

Market adjustment

After falling close to $30 per barrel, crude prices had been rising steadily and peaked last week above $73. But dismal jobs numbers suggested energy use will be muted for some time, and prices have tumbled 19 percent since then.

"The market is trying to adjust right now,” said Oklahoma City University economist Steve Agee. The peak price of $147.50 a year ago "was way too high, and $30 is way too low,” he said.

Several conditions have affected demand, including the severity of the prolonged recession and a growing inventory of stored crude oil, he said. Also, "Americans right now are real responsive to prices.”

But oil prices should be at least $60 "to encourage producers to drill,” he said.

And based on some early signs that there was marginal GDP growth in the second quarter that just ended, an even stronger third and fourth quarter could firm up oil prices to almost $80 by the end of the year, he said.

"I think we’ll find on average the price will move between $60 and $80 for the rest of the year,” Agee said.

Cost fluctuations now rest on demand, yet "the rise from $30 to $60 was not from supply and demand, but from Wall Street speculation that thought the economy was on the road to recovery,” AAA spokesman Chuck Mai said.

"Prices are coming down because demand is still quite low,” Mai said. "It has not rebounded as many thought it would.”

Industry seeks stability

Most major energy industry projects "need a price of at least $60 a barrel to fund any drilling,” said Bruce Bell, chairman of the Mid-Continent Oil & Gas Association of Oklahoma. "We’ve got to have some kind of stability to fund these projects.”

Bell said he believes the price of oil will hover between $60 and $70 to the end of the year.

CONTRIBUTING: The Associated Press