Oil to fall below $100

There may be some good news for oil companies, which are still reeling under losses. A Mecklai Financial report has forecast that West Texas Intermediate, a benchmark in global oil pricing, will fall to under $100 a barrel, compared to around $124 a barrel at present.

However, the relief may be temporary since prices are expected to return to over $120 a barrel level by December 2009. A dip in oil prices by the end of 2008 will come along with an overall decline in agricultural commodity prices, which have been giving a tough time to policymakers due to their impact on inflation. 

ROCKY SENTIMENT Where are prices headed
	Dec-08	Dec-09
Rupee (vs dollar)	41.75-43.25	38.05-40.10
WTI crude ($/barrel)	99.16	121.43
Gold ($/ounce)	725	906
Copper ($/tonne)	6,719	8,806
Wheat (cents/bushel)	626	"�
Palm oil (Ringgit/metric tonne)	3,085	"�
(Source: Mecklai Financial)

Mecklai's analysis of data since 1970 shows that a bull run in farm commodities lasts between one and two years.

So, the current run in crop prices, which started in 2005 with one commodity after another taking turns in rising, will be over by July.

In addition, the report says, the analysis also coincides with the view that there is a negative co-relation between commodity prices and dollar, which will strengthen. But, what may not be good news for Indian policymakers, who are trying to combat inflation, are the projections on the rupee.

According to the analysis, at the end of December 2008, the rupee is expected to range between 41.75 and 43.25 against the dollar. But it is likely to appreciate to 38.05-40.10 against the US currency in December 2009, the report, which was prepared in May, says.

"The sentiment will be rocky. Inflows will come back since people are looking to invest in India," says Jamal Mecklai, chief executive officer of Mecklai Financial.

At the same time, inflation, trade deficit and politics will weigh on the markets, he says, while predicting that the Indian currency will trade in the 39-43 range against the dollar.