MANILA, Philippines--The world may have finally seen the worst of global oil price spikes and as nations scale back consumption of the scarce resource, prices will likely ease further to average at $107 a barrel next year, US investment banking giant Merrill Lynch said.
Stephen Corry, Hong Kong-based head of investment strategy at Merrill Lynch (Asia-Pacific) Ltd., said on Friday that commodity experts were beginning to see the balance between global oil demand and supply being restored, which would thus make it unlikely for prices to surge further toward $200 a barrel as feared by many.
As of Friday, oil prices based on the light, sweet crude or WTI benchmark was trading at about $122 a barrel, down from the record-high of close to $147 seen in previous weeks.
"The potential removal of oil subsidies in Asia and in other emerging markets will lead to demand restructuring. We've seen that in the US, with airlines cutting back, with transportation, shipping cutting their cruising speeds. These are all examples of demand restructuring," Corry said in an interview with the Philippine Daily Inquirer (parent company of INQUIRER.net).
"It's probably more evident here in the Philippines than anywhere else in the Asian region because there are no fuel subsidies here and oil consumption has fallen 10 percent (a year)," he said.
Unlike other countries in the region like India, Malaysia and Indonesia, the Philippines has deregulated the oil industry in the 1990s, scrapping fuel subsidies that weighed down government finances.
With the removal of oil subsidies, demand for erstwhile subsidized goods is expected to go down and consumers are seen better conserving supply.
"We think that oil prices have peaked and will be lower in the second half and will average at $107 a barrel for the whole of 2009. So the lower the oil prices, the better it is for the global economy," Corry said.
Merrill Lynch had projected that oil prices would peak at $150 a barrel, but Corry said the peak may have already been hit at the record highs posted in previous weeks.
