Oil prices may dip to USD 25 a barrel next year: Merrill Lynch

Global financial services major Merrill Lynch has cautioned that oil prices may decline to a low of USD 25 a barrel next year if the slowdown that has already hit the developed nations extends to China. Merrill Lynch in its global outlook for 2009 warned that oil prices could fall as low as USD 25 a barrel next year if the recession affecting the US, Europe and Japan extended to China, which is the main driver of demand growth in commodity markets in recent years. Oil prices has fallen to its lowest levels in almost four years, even below USD 44 mark, despite interest rate cuts initiated in the UK, Europe and Sweden. The Financial Times quoted Francisco Blanch, head of Commodities Research at Merrill Lynch, as saying the main scenario for oil prices was to average USD 50 a barrel in 2009. However, he warned that, a temporary drop below USD 25 dollar is possible if the global recession extends to China. Nymex January West Texas Intermediate rose USD 0.28 dollar to USD 43.95 a barrel, but is still in the vicinity of Thursday's low of USD 43.79 a barrel, its weakest level since January 2005. While, ICE January Brent climbed 0.45 dollar higher to USD 42.73 a barrel. Further, the FT report quoted Blanch as saying that, "in the short run, global oil demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations." He added, oil prices were likely to bottom in the first half of next year and start a gradual recovery from June 2009. Besides, Merrill Lynch has also cautioned that in the US refiners profit margins for producing petrol could weaken further as motorists cut back on driving.