Merrill Lynch: oil prices could fall to $25

Francisco Blanch, head of commodities research at Merrill Lynch, today said his main scenario was for oil prices to average $50 a barrel next year, but warned: “A temporary drop below $25 is possible if the global recession extends to China”. Blanch added. “In the short-run, global oil demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations.”

Global oil demand will contract in 2009 as economic growth slows to its weakest since 1982. Merrill’s $50-a-barrel assessment for 2009 is the second- lowest among 32 analyst estimates compiled by Bloomberg, after a prediction of $43.13 by ANZ Banking Group Ltd. issued on Nov. 18.

ETFs/Stocks :

ProShares Ultra Oil & Gas ETF       DIG  $25.77  -2.42 (-8.58%)
ProShares UltraShort Oil & Gas ETF  DUG  $36.44  +2.95 (+8.81%)

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Sources :

1. FT.com: Merrill warns oil prices could fall to $25, December 4, 2008 13:56
2. Bloomberg: Oil May Fall Below $25 Next Year, Merrill Lynch Says (Update1), December 4, 2008 09:27 EST

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