"At the beginning of this year, $80 per barrel seemed high. Today, as we enter the last quarter of the year, we are speaking of prices that have 'tumbled' to $109 per barrel," the Report said.
"With a certain amount of 20/20 hindsight, we can now say that oil prices appear to have overshot the level that could be sustained by the market this summer," the analysis went on to say, citing the demand destruction caused by prices reaching $125 per barrel.
"The extra production put into the market this past summer by Saudi Arabia, coupled with additional production capacity coming on in the second half of this year and the end of Chinese pre-Olympic stock building, provided the market with additional assurances that supplies would be adequate."
In addition, "Market participants are coming to the realization that nothing significant is likely to happen until well after the U.S. presidential elections and the establishment of a new U.S. administration."
The Report also addressed the sudden recovery of prices on Monday.
"Once investors realized that the bailouts are mostly monetary instruments that will pump liquidity into the markets, oil and other commodities regained some favor as a safe bet in troubled times (especially at prices less than $100 per barrel)."
For the remainder of 2008, the Report forecasts that expectations of a global economic slowdown will reduce wild swings and stabilize prices at relatively modest levels.
"Compared to the monthly average prices in excess of $130 per barrel we saw in June and July, it is our expectation that prices are likely to trade in the $95 to $115 per barrel range most of the time in the coming months.
"There may be occasional excursions below $90 or above $120 per barrel, but they are likely to be short-lived. Prices above this range will destroy demand and tilt the world economy towards recession. Prices below this range could force OPEC into a 'price defense' mode of operation, and place some new sources of unconventional oil, like tar sands projects in Canada, at risk."
