Oil price ‘is set to dive to $20 a barrel’

A "devastating" glut of crude this autumn will send the oil price plunging to $20 a barrel, a veteran adviser to the US government has warned.

Academic Philip Verleger, who has built up a following for predicting last year's $147 a barrel "superspike" and then the six-month "reverse spike" to $34 last winter, says the recession will force down oil to prices last seen in 2002.

"The economic situation is not getting better and Opec [the Saudi-led oil producing cartel] does not realise the magnitude of the [output] cuts they need to make," said Verleger.

Verleger is forecasting a surplus of 100 million barrels of oil as production outstrips consumption. Worse, he says, he does not believe the world has the capacity to store the growing surplus. "If the recession continues and its a warm winter it's going to be devastating," he said.

He is running against the tide. An average of analyst forecasts on news agency Bloomberg indicates the consensus opinion is oil will average $63 a barrel in the last quarter of the year as the received wisdom is China and the other major emerging economies will continue to grow. Brent crude today slipped 38 cents to $63.37.