WTI oil prices could continue to trade in a choppy fashion this week, between $73 and $79. Investors who had been concerned about oil’s near-term fundamentals may have largely exited the market.

Another pronounced wave of long liquidation is not expected. However, higher prices may be averted by profit-taking with economic growth in the world’s major economies expected to cool during the second half of 2010.

Although supplies are ample to meet current demand levels, the longer term effect of the Deepwater Horizon disaster is likely to exacerbate delays in bringing oil production on stream and could be the precursor to pushing prices sustainably above $100 over the next five years.

The International Energy Agency estimated that global offshore oil production could be reduced by 800,000 – 900,000 barrels per day by 2015 if there was an extended moratorium on new drilling activity worldwide, similar to the policies currently in place in the Gulf of Mexico.

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