Oil Price Likely to Decline Again in Near Term

ROME (Dow Jones Newswires), May 25, 2009

Declines in oil prices are likely in the near term, leading to persistently subdued investment next year and the risks of supply crunch, top International Monetary Fund official John Lipsky said Monday.

The statement comes as oil prices rose to about $60 a barrel recently, nearly double their December level, sparking speculation they could be geared for a new spike.

Lipsky, a first deputy managing director at the IMF, told a G8 meeting of energy ministers here that "further near-term declines are likely."

He said that's because "global oil demand is expected to recover only gradually, reflecting the prospect of a gradual global growth recovery" and because "spare capacity in OPEC producers has risen substantially."

Lipsky added that also weighing negatively on prices is the inventory forward demand cover which is "estimated to have reached more than 62 days by end-March, substantially above the recent five-year average of some 53 days."  

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