Brent 'could average below $100 in 2013'
London, May 24, 2012
An increasing number of forecasters expect Brent crude to average less than $100 a barrel next year because of downward pressure from Europe's debt crisis, a slowdown in Chinese economic growth and hopes for a resolution of the Iranian nuclear crisis.
Reuters' monthly oil poll, based on forecasts from 37 analysts, forecasts Brent averaging $115.10 a barrel in 2012, down $2.20 from the April poll - the steepest month-on-month cut in the poll over the past year.
In 2013, Brent is seen averaging $113.20 a barrel, also a cut of $2.20 from April. A third of analysts have reduced their forecasts after a fall in prices from $125 at the beginning of April to just over $105 now.
While they remain in a minority five analysts are now calling for a sub-$100 average next year, three more than in last month's poll.
'The crisis in the euro zone looks set to enter a new and much more dangerous phase. This could involve not just sovereign defaults in the periphery but also the potential exit of one or more countries from the currency union altogether,' said Capital Economics analyst Julian Jessop.
Jessop added that another catalyst for the next big step down in oil prices could be an easing of sanctions on Iran.
Capital Economics has the lowest forecast in the poll, calling for Brent to average $104 in 2012, $85 in 2013 and $80 in 2014.
Other analysts that are forecasting oil to average less than $100 a barrel in 2013 include the Centre for Global Energy Studies (CGES), Nomisma Energy, Raymond James, and Santander. Chevreux is forecasting oil to average exactly $100 next year.
Brent to date this year has averaged $117.60.
An OECD warning on Tuesday that the euro zone debt crisis could derail a shaky global economic recovery renewed concerns over global oil demand.
'The macroeconomic risk coming from Europe will need to dissipate before we see crude oil market fundamentals dominate pricing again,' said Michael Creed from National Australia Bank.
A quarter of respondents still saw Brent prices at or above $120 a barrel in 2012 and almost half of respondents at or above $120 next year.
The highest forecast for this year belongs to Societe Generale at $127 a barrel. For next year Goldman Sachs at $130 and Credit Suisse at $132.5 are the most bullish forecasters, Strong demand in Asia and shrinking Saudi spare production capacity often cited as the main bullish factors.
'While the euro area crisis, together with softer Chinese data, is likely to heavily temper the short-term upside for oil prices, it does not yet, in our view, presage a more dramatic sustained shift downwards in prices,' Barclays analysts Paul Horsnell and Amrita Sen said.
'Considering the world's central banks' actions to stimulate the economy - even if the tension in the Middle East fades, there is still high upside risk in the oil market as inflation starts to bite,' said Thorbjoern Bak Jensen from Global Risk Management.
The poll showed that US crude WTI will average $103.10 per barrel, down $2.50 from $105.60 in April.
WTI's discounts to Brent should narrow to $7 a barrel next year from $12 this year as the Seaway pipeline becomes operational, analysts said.
The Seaway pipeline began pumping crude from Cushing, Oklahoma, oil tanks to the heart of the US refining industry in Houston last Saturday, marking a historic shift in the way oil flows across the United States.
'A significant narrowing should be on the cards once the pipeline capacity linking Cushing to the Gulf Coast reaches 400,000 b/d,' said Sebastian Wehrle of JBC Energy. – Reuters