A Morgan Stanley report which, under its base forecast, said oil prices would end 2010 trading at $95 a barrel, $100 in 2011 and $105 in 2012. In a bull market, the bank expects oil prices to touch $110 in 2010, $120 next year and $150 the year after.

The report, sent to Emirates Business, shows optimism even in a bear market as it forecasts $60 by the end of 2010, $65 in 2011 and $70 in 2012. Industry estimates say $60-$70 a barrel is good enough for the oil producing states to pursue their diversification and expansion plans.

Figures from the report show global demand will reach 86.6m barrels per day (bpd) in 2010, two per cent higher than the 84.9m bpd recorded last year, which saw the steepest decline in a decade.

The Middle East, which controls more than half of the world’s proven oil reserves, will lead the oil demand growth over the next two years after China. Developed countries such as North America and OECD Europe on the other hand will see marginally higher oil demand this year but will witness the same or contracting demand beginning next year until 2012.

Overall, the world should still see higher demand in 2010 as economies recover from the worst recession since 1930s, pushing prices to higher level.

Out of the near-87m bpd demand projection, only nine per cent will come from the Middle East and 10 per cent from China. The lion’s share still comes from North America (27 per cent), OECD Europe (17 per cent) and OECD Asia (nine per cent).

However, the Middle East and China have increased their share in the global demand pie by 21 per cent while the market share of the three OECD regions barely remains the same. China leads the race with a projected demand growth of 4.8 per cent in 2010 (8.7m bpd), 6.9 per cent in 2011 (9.3m bpd) and 5.4 per cent in 2012 (9.8m bpd).

Running second in the list is the Middle East whose demand is expected to jump by four per cent from 7.3m bpd last year to 7.6m bpd this year. It is forecast to grow by another four per cent year on year in the next two years to reach 7.9m bpd and 8.2m bpd in 2011 and 2012, respectively.

The demand in the region is therefore higher than the non-OECD average increase of three per cent this year. OECD countries, meanwhile, will only see one per cent growth and is thereafter projected to see dwindling demand.

Morgan Stanley projects there will be 1.7m bpd of additional oil demand this year over last year’s 84.9m bpd thanks to a collective GDP growth forecast. Out of this incremental demand, only 200,000 bpd will come from OECD with the non-OECD firmly driving global demand.

The latest future oil trading price forecasts from Morgan Stanley are grounded on the IMF, whose crude oil forecasts were used by the IEA, which pegged global GDP growth in 2010 at around 3.1 per cent.