Oil could fall to $40/bbl in 2009: Deutsche Bank

NEW YORK (Reuters) – Oil prices could fall to as low as $40 a barrel next year as more efficient refining capacity comes online and production costs for some regions fall, Deutsche Bank said in a Wednesday research note.

“The most underappreciated issue is the combination of poor demand with major new refining capacity additions and the extent to which that will undermine light sweet crude prices,” the bank said in the note outlining the downside risk to its 2009 oil forecast.

“We believe that cash production cost ‘floors’ for the oil price are shrinking target (lower costs, stronger U.S. dollar), which imply a ‘V’ shaped downside to $40 a barrel crude around April 2009.”

Reuters