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Oil Prices To Drop Next Year

Though oil prices climbed on Monday to exceed 70 US dollars per barrel, analysts expect the prices to drop by next year

Though oil prices climbed on Monday to exceed 70 US dollars per barrel, analysts expect the prices to drop by next year, according to Channel News Asia report on Tuesday.

Attributing the present surge in oil prices to a short-term supply problem and industry players' concern over profitability in competition with each other, they believe the record high prices are "unsustainable".

They estimate that a more balanced demand-supply relationship in the global oil market is emerging, which will help moderate oil prices within a year.

"If you look at the supply and demand picture for crude oil, weare still seeing more supply out there than demand. Supply is about 85 million barrels a day and demand is about a million barrels less, a more favorable picture than six to nine months ago," Song Seng Wun, local economist at CIMB-GK Research, was quoted as saying.

He expects oil prices to drop by five US dollars or more in 2006.