Merrill Lynch cuts oil forecast to $50

LONDON: Merrill Lynch & Co cut its 2009 oil price forecast to $50 a barrel from $90 on speculation that Opec is powerless to support the market as fuel demand shrinks amid a global economic slump. Merrill lowered its 2010 forecast to $70 a barrel from $100.

Iran and Venezuela have called for the Organisation of Petroleum Exporting Countries to cut production again after an October 24 decision to reduce supplies by 1.5 million barrels a day failed to stop the slide in prices. US light crude for January delivery has tumbled more than 65% from a July record of $147.27 a barrel, to trade around $53 a barrel on Thursday.

However, the Thanks Giving holiday weekend demand in the US and an upcoming Opec consultative meeting limited trade. London Brent crude fell $1.03 to $52.89 a barrel.

���We doubt Opec can materially alter either market fundamentals or sentiment near-term,��� Merrill analyst Alastair Syme in London said in a report on Wednesday, adding ���In a rapidly falling demand environment we see little that suppliers can do to either reverse sentiment or tighten market fundamentals.���

Any further reduction in Opec supply ���will be both politically problematic and unlikely to have a significant bearing until next year,��� according to the report, which cited forecast changes by Merrill Commodity Strategist Francisco Blanch. The bank earlier this month said that global demand will contract by 400,000 barrels a day next year as recession in the world���s developed economies drives down fuel demand and banks cut credit to consumers.

Merrill���s $50 estimate for 2009 prices will be the second-lowest among 32 analysts tracked by the agency after Australia and New Zealand Banking Group senior commodity strategist Mark Pervan, who expects average prices near $43 in 2009.

The median forecast among analysts for 2009 average West Texas Intermediate crude prices is $75.40 a barrel. That 2009 median estimate had peaked at $120 during July when oil prices were at their highest.

Merrill���s forecasts for Brent crude are the same as its West Texas Intermediate estimates from next year onward. It expects prices to average $43 in the first quarter of 2009, $45 in the second, rising to $61 in the last quarter.