What a difference a month makes. After running above $70 last month, the analysts and experts are expecting the price of oil to slink away from $70 in the next few months.

But, there's still a belief that the price of oil will close around $75 by year's end.

Philip K. Verleger Jr., University of Calgary energy expert is not one of the people that thinks oil will trade around $75. He sees a radically different picture with the price of oil slumping all the way down to $20 because the fundamental balance of supply and demand is out of whack.

LAT/Naked Capitalism: For eight straight months, oil supplies have been running about 2 million barrels a day higher than the global demand of 83 million barrels a day, Verleger said. Eventually, he and others predicted, suppliers will tire of paying to store all of the surplus oil and flood the market.



"That is the largest and longest continuous glut of supply that I have seen in 30 years of following energy prices," Verleger said. "It's a huge surplus. There has never been anything like it."

Verleger says surplus oil is being held by investors, oil companies and banks. Eventually they'll run out of cheap storage locations, and when that happens, the market will be flooded with oil and price will bottom to $20.

Goldman and Dresdner agree with the idea that the price of oil will fall, but neither sees it falling that much. Tracy Alloway at the FT's Energy Source has reports from each of them on oil.

Here's Dresdner's take: As excessive economic optimism fades, markets are reassessing the situation. The fact that oil prices have doubled since mid February was largely due to greater economic optimism and not any improvement in the general fundamental data. Although US crude stocks have fallen sharply in past weeks, this was primarily because US refineries increased crude oil refining levels in the run up to and during the summer driving season. Owing to higher oil product stocks, weaker demand for petrol and distillates and falling refining margins, US refineries could demand less crude oil in the near term. We expect the price correction to continue in the direction of $60 a barrel in the next few days. Even reports on further attacks on oil infrastructure in Nigeria have had little effect, an indication that the mood is changing on the oil market.

And here's Goldman's take:

In general, the recent price moves are consistent with our views. In oil, we continue to expect the market to move into deficit in late 3Q09, which will begin to relieve some of the downward pressure on timespreads that we anticipate will continue until the fundamentals improve. We also believe that industry economics support long-dated prices around $75/bbl for the balance of the year and thus have cautioned that the build-up of investor length that pushed long-dated prices above $80/bbl in the past month was likely overdone, leaving the market vulnerable to liquidation risk. For metals, we continue to expect that near-term fundamentals will likely soften as Chinese buying programs diminish, but that price action will likely remain dominated by long-dated metals prices, which are closely linked to economic sentiment and the performance of other risky assets.