Oil May Rise to $75 in 2010

Oil May Rise to $75 in 2010, China’s Think Tank Says 

 Crude oil in New York may average $75 a barrel next year, said China Petrochemical Corp., the nation’s largest oil refiner, citing a forecast by a government think tank.

West Texas Intermediate oil, the U.S. benchmark, may gain on a recovery in global demand, a weaker dollar and accelerating inflation, Sinopec Group, or China Petrochemical, said in its company newsletter today. It cited a report by State Information Center, a research institute under the nation’s top economic planner.

Benchmark crude in New York, which lost 54 percent in 2008, has gained 66 percent this year on signs that the global economy is recovering from its worst recession since World War II. Oil will average $85 a barrel in 2010 and $97 a barrel in 2011, Barclays Capital said in a report on Dec. 17.

 “If the global economic recovery is better than expected in 2010, which restores investors’ confidence in financial markets and the U.S. dollar weakens further, then the increase of the global crude price may be bigger,” the center said.

The Chinese government should seize the opportunity to encourage domestic companies to expand oil and gas exploration overseas, it said. The government should provide policy and financial supports to Chinese oil companies to secure oil supplies for domestic use, it said.

Company Spending Chinese oil companies have spent at least $13 billion on overseas assets since December last year as they take advantage of lower valuations caused by the economic slowdown to meet energy demand in the world’s fastest-growing major economy.

 Domestic oil companies should also increase cooperation with oil-rich countries to jointly build refineries to secure stable crude supply and reduce spot purchases.

They should also aim for more loan-for-oil agreements to diversify the nation’s energy supply, it said. China has signed such agreements with countries including Russia, Brazil and Kazakhstan this year, tapping its $1.95 trillion foreign- exchange reserves to buy assets after oil fell from a record $147.27 a barrel in July 2008.

 Crude oil was at $73.96 a barrel, up 24 cents, on the New York Mercantile Exchange at 3:53 p.m. Singapore time.   

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