Oil to remain at $59/bbl in 2009; overweight on RIL: Macquarie

MUMBAI: Macquarie believes oil prices would remain at $59 per barrel levels in 2009 on an average with chances of price rises in the later part of the year. For 2010 and 2011, the investment banking firm has forecast cuts of $3/bbl to $76/bbl and $2/bbl to $90/bbl, respectively.

On the basis of increase in oil prices the in the second half of 2009, Macquarie is overweight in the pure E&P companies or those integrated oils with a high level of exposure to oil prices. Among the Indian companies, RIL, Cairn Indian and ONGC are their top pick. However, the firm remains underweight on petrochemical segment as the sector faces a combination of weak demand and substantial capacity additions.

For the 12 month horizon, Macquarie has upgraded Cairn to outperform with a target of Rs 202, ONGC to outperform with target of Rs 850 and RIL to outperform with a target of Rs 1,700.

Attributing the sharp reductions in oil prices in 2009 to the low level of economic activity around the world, the Australian based investment banking firm adds that, ���The recovery in prices (in 2010 and 2011) is based on our assumption of improved economic activity from 2010 and beyond and a belief that OPEC can and will cut output by an amount large enough to cut stock levels and create a shortage of supply.���

However, for the first half of 2009, oil prices would trade in the range of $40-50/bbl and the second half of 2009 the oil prices would increase due to the large production cut.

On expectations that OPEC will cut output by around 3.5 million barrels per day by mid-2009 and promote a sharp increase in prices, oil prices would rise from current levels of around $40-45/bbl to $75/bbl by end 2009 and towards $100/bbl by end 2010.