Bloomberg Oil to Average $65 in Second Half on Economic Outlook, UBS Says

Crude oil is expected to average $65 a barrel during the second half of this year as the outlook for the global economy improves and on increased appetite for risk among investors, UBS AG said in a report.

UBS raised its forecast for West Texas Intermediate, the U.S. benchmark crude variety, from $55 a barrel, analysts from the bank wrote in a report dated yesterday. Oil for August delivery traded at $60.36 at 1:50 p.m. Sydney time on the New York Mercantile Exchange.

“Greater risk appetite and some greater optimism concerning the future are likely to see prices tend towards the top half of a trading range of around $55 to $75 a barrel in the second half of 2009,” UBS analysts led by Melbourne-based Gordon Ramsay wrote.

Oil reached a record $147.27 a barrel on July 11, 2008 before dropping to $32.40 on Dec. 19 as the global recession curbed energy use. Prices are up 35 percent this year and reached an eight-month high of $73.38 on June 30.

UBS also raised its 2010 forecast to $70 a barrel from $58, the analysts said. Oil prices will be supported by a weaker U.S. dollar, UBS said. A fall in the dollar spurs demand for commodities as a hedge against inflation.

---Editor: Amit Prakash, John Viljoen.