Reuters reported that Morgan Stanley has raised its forecast of US crude oil price to USD 105 a barrel in 2012 from USD 95 due to tightening spare capacity. It expected global spare production capacity to stay ample through end of 2010, before declining in 2011 and reaching 2007-08 like tightness by 2012.
Morgan Stanley said that "Assuming that demand returns to growth, we see global spare capacity back to 2007-08 levels by 2012 and getting even tighter thereafter. We believe that prices will need to move higher to ration demand as the world struggles to find enough supply."
International benchmark US crude peaked above USD 147 in July 2008 on strong demand from emerging economies such as China. But the global economic recession has curtailed energy demand and slashed oil prices, which have traded around USD 68 to USD 71 a barrel over the last week.
Morgan Stanley assumes oil demand will fall by 2 million barrels per day this year, rebound by 1 million barrels per day in 2010 and then grow by just 1%. It added that post 2012, global liquids production shows the potential to increase to what the bank believes will be a maximum achievable level of roughly 92 million barrels per day.
(Sourced from www.reuters.com)
