'Oil Prices Likely To Stabilise At $90 In 2010'

Oil prices could stabilise in the second half of 2010 at around $90 a barrel, Algeria's Energy Minister, Chakib Khelil has said.

“The oil market will stabilise when the price of a barrel is at $90. This level should be reached between the middle and the end of 2010,” Khelil said in Algiers, according to the APS news agency.

Khelil said the current oil price, which has been rising and is above $70  currently, represents a “normal situation”, due to a fall in reserves and the International Energy Agency raising their forecast for global demand.

The minister said other factors behind the recent price rise has increased fuel consumption in America and the first signs of economic recovery in the US and China.

Members of the Organisation of the Petroleum Exporting Countries (OPEC) were also sticking to their production quotas, Khelil said.

“I don't think prices will continue to rise. They might stabilise or perhaps fall to 65 or 70 dollars a barrel,” he added.

Oil prices fell below $72 a barrel yesterday, halting a three-month rally, as the dollar, which typically trades inversely to crude, was boosted by comments by Russia's finance minister.

Benchmark crude for July delivery was down 23 cents to $71.81 a barrel by mid-afternoon in Europe in electronic trading on the New York Mercantile Exchange.

Earlier in the session, it traded as low as $70.71. On Friday, it fell 64 cents to settle at $72.04.

Oil prices have more than doubled since March partly on expectations that massive U.S. fiscal and monetary stimulus will hasten a decline of the dollar. Investors often buy crude and other commodities as a hedge against the risk of inflation posed by a weaker dollar.

The euro fell to $1.3880 yesterday from $1.4015 on Friday, while the British pound was down to $1.6423 from $1.6450, after Russian finance chief Alexei Kudrin said this weekend that the dollar's status as the world's main reserve currency was unlikely to change in the near term.

Traders are also wary that the recent price run-up isn't supported by improving supply and demand fundamentals.

“There's more talk in the market of expectations of a pullback in oil,” said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. “It's rallied too much in too short a period of time.”

“Oil is still very strong given the weak overall fundamentals,” he said.

On Friday, the Organisation of Petroleum Exporting Countries dropped its daily demand forecast for 2009 by 230,000 barrels, estimating that global consumption would shrink to 83.8 million barrels a day.

At the same time, some analysts were heartened by the International Energy Agency's Thursday report, which forecast a slightly less severe cut in global demand, making an upward revision of 120,000 barrels a day to total daily demand of 83.3 million barrels.

“This may seem a small change to you but it could be the first sign that the doom-mongers have overdone it as far as demand is concerned,” said KBC Market Services in London.

Nigerian militants said Saturday they had sabotaged a pipeline, run by Chevron Corp.'s local subsidiary, in the restive southern Niger Delta region.

Violence has been escalating in the region as the military intensifies operations to flush out rebels battling for a larger share of the country's oil revenues.

In other Nymex trading, gasoline for July delivery fell 0.69 cent to $2.0362 a gallon and heating oil was nearly flat at $1.8378. Natural gas for July delivery rose 9.8 cents to $3.955 per 1,000 cubic feet.

In London, Brent prices fell 40 cents to $70.52 a barrel on the ICE Futures exchange.