Oil on a slippery slope

The word spot isn the luckiest of words if you are a cricketer or an oil investor these days. While the former might end up paying too heavy a price for fixing a spot, the latter may witness the spot price changing spots at a much more rapid pace than many will fear. Lets put it straight - global oil prices are all set to go down.
The recent downward revision of more than $2/bbl in just under a month is the biggest monthly revision in the EIAs recent history. For an event of such magnitude, there have to be substantial fundamental shifts in the outlook of the black gold. Some believe that it may be a kneejerk reaction to the worries in the eurozone, but the EIA has gained enough credence in the business of oil price forecasts.
The EIA now expects oil prices to average $77/bbl in 2010, down from the projection of $79/bbl in August. The oil price forecast for 2011 has also been downgraded from $84/bbl a month ago to $82/bbl in the latest short-term outlook. It is the less-than-previously-expected state of the global economic recovery which has forced the EIA to take the cautious route.
The oil price forecast is now based on a global GDP forecast of 2.8 percent and 2.31 percent for 2010 and 2011 respectively, down from 3.1 percent and 2.7 percent cited a month ago. Experts in the market believe that a cut as big as this one in the global GDP estimates warrants a steeper decline in the oil prices than what the EIA has suggested.
Add to that the never-ending European woes casting serious doubts over the sustainability of the oil demand in the region amid talks of a looming double-dip recession. The fall in prices could well be augmented if the oil inventory level does not recede in a couple of months, as it is already sitting on a record high, putting pressure on the prices.
The next month is vital for the short-term direction of oil prices, as the Opec members meet to decide the oil production strategy. If the status quo remains, it may send oil prices to the 60s, as high inventory levels would eventually lead to lower prices. Conversely, a cut in oil production is what can save the black gold going downhill - though, only in the short run.