U.S crude oil is expected to average $79.44 a barrel in 2010, a Reuters poll showed on Monday, a slight decline from the June poll and the third consecutive lower monthly forecast.

The poll of 31 analysts, banks and government agencies showed a lower consensus forecast, and respondents cited Chinese macroeconomic policy, global oversupply and a seasonal drop in demand to explain their forecasts.

Oil has averaged above $75 a barrel in 2010, its second highest average price ever, but has come up against resistance any higher, as disparate global data shows a fragile recovery from the economic recession has only just begun to take hold.

"It will not be well into Q3 that oil decisively breaks above $80/bbl," said senior analyst Harry Tchilinguirian at BNP Paribas, who left U.S. crude forecasts unchanged based on a strong dollar and recent Chinese currency moves. Last month China reformed its currency by increasing the yuan's flexibility and ending a 23-month-old peg to the dollar. China's central bank sent clear signals it would keep an appropriately loose monetary policy.

"Inflation pressures may be building in the East, but in terms of the countries that matter for oil demand growth, we are not expecting any acceleration in the pace of monetary policy tightening in China," Tchilinguirian said.

SEASONAL DEMAND

This month the Reuters oil price poll leaves the second quarter and moves into the third as the front quarter for medium-term forecasts, with some analysts saying seasonal oil market supply tightness could crop up before October.

U.S. crude is expected to average $77.26 in the third quarter of 2010, down from $78.50 in the last poll.

"We should get the first significant stock draw of the year in 3Q10," said Global Oil Analyst Christophe Barret at Credit Agricole-CIB, who left their Q3 WTI price unchanged but raised the year-end forecast to $78 from $77.60 in last month's poll.

"On the supply side, field maintenance in the North Sea, production disruption in Nigeria, Angola and Iraq and a very active hurricane season in the U.S. are limiting crude availabilities in 2H10," Barret said.

U.S. crude prices this year have risen to trade as high as $87.15 in April, and have fallen as low as $64.24 in May.

Production delays at Nexen's 18,000-bpd Scott platform in the North Sea dropped the Forties crude supply this month, which sent Brent futures briefly into backwardation and came as North Sea output is set to fall by 17 percent in August on seasonal maintenance.

Private weather forecaster WSI Corp has forecast 19 named storms, 11 hurricanes and five intense hurricanes in the Gulf of Mexico this year, above the 1950-2009 averages of 10 named storms, six hurricanes and two intense hurricanes.

DEMAND RESURGENCE

Poll numbers showed a slightly bullish forecast into the rest of the calendar year, with fourth quarter data rising to $79.75 per barrel on guarded optimism that supply tightness will over time drive prices higher.

"Ongoing macro headwinds will keep any crude price upticks in check, at least for the time being," said Sven Streitmayer at Landesbank.

"However, strong demand growth, shrinking global inventories and renewed investor interest will lead to higher oil prices in the medium term."

The U.S. Energy Information Administration this month raised its 2010 world oil demand growth forecast by 60,000 bpd from its previous estimate, with nearly all the increase coming from outside major industrialized countries.

The International Energy Agency, which represents consumer nations and looks primarily at global oil supply, this month said OECD demand would fall faster than previously expected into 2011, though predicted robust demand in emerging markets.

The Paris-based IEA said rising supplies would offset higher demand through 2015, and this month set its medium-term outlook for global oil demand growth at an average of 1.4 percent annually, or 1.2 million bpd from 2009 to 2010, up from a June forecast of 540,000 bpd.

Financial Mirror, July 26, 2010 - Reuters