Oil price assumptions. The US EIA in its most recent Short-Term Energy Outlook report, has lowered its 2010 forecast for average WTI spot price to US$78.75/barrel from last month’s projection of US$82.18. While anticipation of stronger crude oil demand has previously helped to support oil price above US$65/barrel, we believe the near- to medium-term outlook has turned cautious. Demand for crude oil remains relatively lacklustre, while supply remains ample. Moreover, financial demand has dwindled due to credit tightening. In the absence of fundamental catalysts for crude oil prices to move higher, we have assumed prices will continue to hover at current levels of US$65-75 at least through the 2H10, before picking up slightly in 2011 to a range of US$75-85. In our view, longer-range projections are unreliable at this stage, although our expectations remain on the positive side.
Oil And Gas - Taking A More Cautious View - 10/6/2010
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