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US bank raises forecast for average crude price

"There is no indication why [the price of oil] has reached US$100 in terms of supply and demand indices."

Odein Ajumogobia, Nigerian oil minister

JPMorgan Chase & Co, the third-largest US bank, raised its forecast for oil to average US$71.69 a barrel this year, up from an earlier prediction of US$66.40 for this year.

Oil prices have risen 20 percent in the past month amid concern supplies are not sufficient to meet demand.

The price reached US$98.62 a barrel on Wednesday, the highest since the contract started trading on the New York Mercantile Exchange in 1983.

"Clearly, the last month was a surprise," JPMorgan analyst Katherine Spector said in a report released late on Friday. "Initially, we had expected [West Texas Intermediate] to peak at around US$80 late in the third quarter followed by a downward correction of roughly 20 percent into year-end."

Oil rising to US$100 a barrel is "entirely possible," the report said. "Subsequent price moves could be violent -- and we anticipate downward."

The price of oil should average US$88 a barrel in the fourth quarter, the report said.

Crude oil for December delivery rose US$0.86, or 0.9 percent, to settle at US$96.32 a barrel at 2:55pm on the New York Mercantile Exchange yesterday.

Nigerian oil minister Odein Ajumogobia said on Saturday there is no fundamental justification for oil at US$100 a barrel and Nigeria is assuming that prices will not last at this level.

Ajumogobia, who will be heading to Riyadh to attend an OPEC heads of state summit on Saturday, said that no-one in the oil exporters' group would be surprised if the price fell to US$80 in the next few weeks.

"US$100 oil was speculated about three, four, five months ago and we are there now. There is no indication why it has reached US$100 in terms of supply and demand indices," he said in a telephone interview.

Ajumogobia said there was no indication that US$100 oil had had an impact on demand, but he said OPEC was concerned not to undermine economic growth.

Meanwhile, France on Saturday called on oil producing countries to increase both output and exploration because of rising demand.

French Economy Minister Christine Lagarde said she wanted the issue discussed at a meeting of EU finance ministers today and at a G20 meeting in South Africa at the end of next week.

Asked about the chances of an increase in OPEC oil supply before the end of this year, Ajumogobia said: "That will be indicated by how severe the winter is and other factors."

"What we are looking for is a trend. Because we are going down a road no-one has been down before, it is difficult to see a trend," he said.

"Our budget benchmark [for next year] is US$53.80, so we are being reasonably conservative in terms of `this is not a trend that is going to continue.' That is the assumption. I don't see that oil is going to go back to US$40, but I think US$100 is excessive," he said.
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