Oil Prices Expected to Fall for Second Year

Oil prices will fall for a second year in 2002 as non-OPEC nations pump more and the world’s economies grow less than expected, hurting demand, according to a Bloomberg survey of 35 analysts, traders and investors.

Brent crude oil in London, the benchmark for two-thirds of the world’s trades, this year will average around $23 a barrel, little changed from the average through May, the survey said. That’s down 6.7% from 2001 and below the year-earlier record of $28.53 for the 13-year-old contract.

“There are signals that cast some doubts on the economic recovery,” said Roberto Sieber, head of market analysis and chief economist for Shell Transport & Trading Co., part of the Royal Dutch/Shell Group. He declined to give a forecast.

The European Commission last week trimmed its estimate for growth for the second month, and analysts expect an expansion of the U.S. economy will slow from the first quarter. A lack of growth in oil consumption has forced the Organization of the Petroleum Exporting Countries to slash oil output to the lowest level since the Gulf War.

Oil prices have dropped 17% over the last year after recessions in the U.S., Europe and Japan reduced energy use. September’s attacks on the U.S. further undermined growth, slashing the number of people flying and delaying the recovery.

To bolster prices, OPEC reduced sales four times in a year, the latest taking effect on Jan. 1, and secured the cooperation of five rivals to limit supplies. That accord ends this month.

A recovery from a two-year low in crude prices in November has come in part because of violence between Israel and the Palestinians and traders’ concern about an attack on Iraq, the third-largest Middle East oil producer.

Demand for oil this year will rise at half the average rate of the 1990s, after last year posting the smallest gain in two decades, according to estimates from the International Energy Agency. A recent reduction in Mideast violence has depressed prices, analysts said.

Russia’s ending of its cooperation with OPEC will increase supplies and further undermine prices. On May 17, the prime minister, Mikhail M. Kasyanov, said the world’s second-largest producer will end cooperation with the oil exporters group and “export as much oil as we can.”

Norway followed its European rival and said it plans to lift its sales restrictions at the end of June, further undermining oil prices, traders said.

Goldman Sachs Group Inc. is predicting the lowest price of $20 a barrel for the year. Based on trading so far, that implies about $16.80 for the second half.