Vikram Pandit-led Citigroup has cut its oil price forecast to one of the lowest levels among Wall Street peers,saying even if the United States printed more money,oil would stay depressed by weak economic growth and fresh supplies from Libya. Citi said it now expected Brent crude to trade at $95 per barrel at the end of 2011 and average $86 in 2012. Citi had Brent averaging $105 in the latest Reuters poll. On Tuesday Brent traded at above $108 a barrel. The main risk is further deterioration in global growth expectations,caused by turmoil in Europe,slowdown in China or recession in the U.S.,Citi said in a note. If this (quantitative easing) were to happen,we believe it would be in response to still weaker growth numbers,and that these would overwhelm the monetary boost,Citi added. U.S. bond buying programme otherwise known as quantitative easing has boosted most commodities prices with large inflows when the previous second round was announced a year ago. U.S. Federal Reserve chairman Ben Bernanke's speech on Friday at an annual central bank conference in Jackson Hole,Wyoming,is the most anticipated event for financial markets this week as they look for hints about further monetary stimulus. The U.S. economy is limping along,and earlier this month the Fed's policy-setting panel signalled it will keep interest rates near zero for the next two years to help out. HIGHER OIL PRICE DAMAGE Olivier Jakob,oil market consultant at Petromatrix in Zug,Switzerland,said he believed that unlike retail investors,professional investors do not generally expect Bernanke to announce another round of quantitative easing. If no QE3 is announced,and the Fed goes no way towards suggesting that another stimulus package is in prospect,then we could get a sell-off,he said. Analysts from HSBC said in a note that despite previous monetary stimulus hopes of economic recovery were diminishing and printing money was no longer an answer in a world of structurally weak growth. The West's ability to shrug off economic shocks has dropped alarmingly. Higher oil prices earlier in the year did far more damage than usual,largely reflecting the ambient noise of deleveraging,HCBC said. Economies typically enjoy some flexibility in dealing with oil price shocks. If credit markets work well,households can borrow to offset a squeeze in real incomes. If they're working less well,governments can borrow on behalf of households and support real incomes via a tax cut. These sources of flexibility may no longer exist,HSBC said. Goldman Sachs,traditionally one of the biggest bulls in the oil market,also said on Tuesday it might have underestimated the amount and speed at which Libyan oil would return to the market,but said it was not yet changing its price forecast. Goldman said it had initially assumed that Libyan production would average 250,000 bpd next year but an end to a civil war may boost that figure to 585,000 bpd or a third of what the African country was producing before the war. (It) would push back the timing on the drawdown of OPEC spare capacity by about three months,said Goldman,which has long said the oil producing group might fail to cushion fresh supply shocks because it has nearly run out of spare capacity.
