Oil Likely to Stay Below $50 This Year, Oman Says

By Ayesha Daya

Jan. 13 (Bloomberg) -- Oil prices are likely to stay below $50 a barrel this year unless the U.S. economy rebounds, said Mohammed al-Rumhy, oil minister of Oman, the Middle East’s largest non-OPEC crude producer.

“I don’t see much movement in the oil price this year, prices won’t go much above $50 a barrel,” al-Rumhy said in an interview in New Delhi today. “Of course, it depends on Obama’s success -- he wants to create 4 million jobs, so if we have 4 million new drivers tomorrow that we don’t have today, demand will rise and so will the price.”

Crude oil fell for a sixth day in New York today, extending a weeklong 25 percent slump on speculation oil inventories increased last week as demand declines. Crude oil for February delivery declined as much as $1.49, or 4 percent, to $36.10 a barrel in electronic trading on the New York Mercantile Exchange. It was at $36.33 a barrel at 12:01 p.m. Dubai time.

Oil prices, after reaching a record $147.27 a barrel last July, have fallen for a consecutive six months as a deepening recession in the world’s biggest consuming regions such as the U.S., Europe and Japan slashes fuel use.

Demand in the U.S., which consumes a quarter of the world’s oil, is falling as job losses lower car use. The U.S. government said Jan. 9 that last year’s job losses marked the biggest drop in payrolls in 63 years. Automakers General Motors Corp. and Chrysler LLC are at risk of collapse should sales fall further.

U.S. Stockpiles

An Energy Department report tomorrow will probably show U.S. crude stockpiles gained 2.25 million barrels in the week ended Jan. 9, according to a Bloomberg survey. That would be the 14th gain in the past 16 weeks. The U.S. economy will contract 1.5 percent in 2009, a monthly poll of economists showed.

President-elect Barack Obama said Jan. 10 that his two-year plan to boost the U.S. economy will generate as many as 4 million jobs, the biggest portion of them in construction, manufacturing and retail.

Oman will record a budget deficit of 810 million rials ($2.1 billion) this year as oil prices decline, state-run Oman News Agency reported this month. The sultanate’s budget for 2009 is based on an average oil price of $45 a barrel, with revenue seen at 5.614 billion rials and expenditure at 6.424 billion rials.

Oman will raise crude production to 805,000 barrels a day this year from 760,000 barrels, al-Rumhy said.

To contact the reporter on this story: Ayesha Daya in New Delhi at adaya1@bloomberg.net