(CEP News) - Oil prices are under pressure after the Energy Inflation Administration lowered its forecast for crude oil prices for 2009 and 2010.

Crude oil prices will average about $42 a barrel for 2009 and to average $53 a barrel in 2010, said a report from the EIA, released on Tuesday. This revised forecast is down from last month’s expectations that prices will average $43 in 2009 and $55 dollar the following year.

The agency is also released more grim news about the U.S. economy and global demand. According to the report the EIA expected to decline by 2.9% in 2009 and modest recovery with GDP rising 1.9% in 2010.

“EIA’s projection for 2009 global oil consumption is now 3 million bbl/d lower than it was in the September 2008 Outlook. World oil consumption is expected to rebound in 2010, growing by 900,000 bbl/d, in response to an economic recovery which is projected to begin at the end of 2009,” the report said.

Near the start of the North American trading session WTI crude hit session highs at $48.30 but soon started trending lower. The selloff picked up speed after the lower forecast from the energy agency and prices are hovering below $47 a barrel.

Despite today’s declines, strategists see some room for oil to move higher ahead of the March 17 OPEC meeting. Expectations for another production cut range from 500,000 barrels a day to 1,000,000 barrels a day.

Andrew Lebow, senior vice-president at MF Global Energy, said he thinks oil prices move higher and touch the $50 a barrel. He pointed out though the higher oil prices move the less chance there is that OPEC will cut production.

He added that prices would have to fall pretty fall to about $43.50 to call an end to the recent rally.

“Oil prices have been on a month long rally and I don’t think we have seen the end of it yet,” he said.

He added markets will be sensitive to Wednesday’s Department of Energy weekly inventory report. He added another build in crude prices could put pressure on prices.

Markets are expecting the inventory report to show a withdrawal of 500,000 in crude oil, a million barrel withdrawal in gasoline inventories and a 200,000 barrel build in distillates.

WTI Crude oil is down $0.74 to $46.33 while ICE crude oil is trading up $0.15 to $44.27.

Meanwhile, ICE RBOB gasoline futures are up $1.73 to $135.24 and Globex natural gas is up $0.01 to $1.27.Heating oil at the ICE is up $1.49 to $123.03.

In the mining sector, spot gold is trading down $26.73 to $895.25 USD. In Canadian dollars, gold is down $48.25 to C$1150.84. Silver contracts at the CBOT are down $0.38 to $12.53.

Bloomberg’s index for base metals is up 2.63 points to 116.22. Wheat futures at the CBOT are up $10.25 to $533.50.

All data taken at 2:07 p.m. EDT

By Neils Christensen, neilsc@economicnews.ca

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Posted in Categories: Commodities, Economy, Eurozone, Releases, USA.

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