The oil market is wavering between market optimism for a global economic recovery and continued weak consumption of oil products, according to Standard & Poor’s equity analyst Tina Vital.

S&P Economics believes this month will mark the official end of the U.S. economic recession. The firm suggests there is little reason to worry about inflation in the short-term, but it could become a factor during the long term. S&P projects U.S. real gross domestic product will expand by 0.9% in the third quarter (versus its prior estimate of a 1% contraction) and contract only 2.9% in 2009 (versus a 3% estimated contraction) before rebounding to growth of 1.5% in 2010 (versus 1.2% growth previously expected). Data suggests consumer spending has begun to recover and credit markets are calming down.

Using data from IHS Global Insight, S&P expects global oil demand to contract by 2.21 million barrels per day to 84.01 million barrels in 2009, reflecting reduced consumption in OECD countries, before expanding by 1.3 million to 85.31 million barrels per day in 2010 on an improved economic outlook. Global oil supply should contract by 2.97 million barrels to 84.59 million per day in 2009, reflecting OPEC cuts, but rise 1.5 million barrels to 86.09 million daily in 2010.

S&P blended data from S&P Equity Research, IHS Global Insight and the EIA to raise its West Texas Intermediate oil-price forecast by $2.20 to $59.71 per barrel for 2009, 2010’s by $3.77 to $72.99, and 2011’s by $4.07 to $77.50.

Separately, U.S. gas prices continue to drop on high storage builds, reflecting reduced industrial demand and increased production as new pipeline service expands into the Rockies and emerging shale plays take hold. With gas demand expected to lead prices going forward, based on data from IHS Global Insight, S&P cut its 2009 Henry Hub bid week gas-price forecast by $0.16 to $3.82 per million Btu, 2010’s by $1.04 to $3.84, and 2011’s by $0.88 to $6.39.

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