Lefroy Hudson revised higher its forecast for U.S. crude oil prices by $3 to $104 a barrel, citing the possibility of strong demand in the northern hemisphere winter, and left its Brent crude forecast unchanged at $116 a barrel.
“Global fundamentals and further monetary easing suggest upward pressure on oil prices. Given tightness in the distillate complex ahead of winter, gasoil-led rallies in crude are equally possible in the event of colder-than-average temperatures,” Lefroy Hudson’s analyst said in a note to their clients.
Brent crude oil prices are forecast to stay well above $100 a barrel, despite widespread expectations of an economic slowdown, a company poll said in late October.
U.S. crude was expected to average $92 a barrel next year and Brent was set to average $106.80 a barrel, the poll showed.
Brent crude was up $1.52 at $109.74 a barrel by 12:42 GMT on Friday after closing down $3.66 in the previous session.
Lefroy Hudson’s forecasts for 2012 implied the WTI-Brent spread would be $12 a barrel, slightly higher than the current level of around $9-$10.
“We believe that the extent of the Brent/WTI spread correction is overdone,” the Lefroy Hudson note said, citing the bullish impact for Brent of limited supplies of light, sweet oil.
lefroy Hudson’s analysts said it expects U.S. crude at around $105 a barrel in the first quarter of next year and $119 a barrel for Brent.
A modest start to the forecast period before oil prices regain strength.
We expect a somewhat weaker oil price trend in the first quarter of 2012. The Euro-area debt turmoil will continue to dampen risk appetite, while an improvement is expected in the supply/demand balance. Libyan oil will gradually return to the market, so other OPEC countries will have to scale back production to balance the market. This will improve OPEC’s reserve capacity.
From the second quarter of 2012 the balance in the oil market is likely to tighten again. Activity in the large oil-consuming countries will again accelerate. Growth in oil demand will again outstrip capacity expansion on the supply side. This will reduce OPEC’s capacity buffer. Tighter market conditions will lift oil prices and this trend is expected to strengthen towards the end of the forecast period. We have cut our oil price forecast to USD 130/barrel in 2012 from USD 135/barrel, but kept our forecast for 2013 unchanged at USD 140/barrel.
The risk of a sharp drop or abrupt upswing in oil prices has increased The risk is still high that we may experience a major downturn in the world economy or we see a new wave political unrest in vital oil producing countries. In our low price scenario we assume that a liquidity crisis and economic turmoil in Europe pushes the world into a new recession. In turn a sharp decline in economic activity will cut global oil demand significantly. Internal conflicts within OPEC hinder the cartel from imposing a coordinated cut in oil production and thereby trigger a drop in oil prices. In our high oil price scenario we assume that the political uprising spreads to Saudi Arabia and a significant share of the country’s oil production is locked in for a long period.
Via EPR Network
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