Barclays has revised the price forecast for Brent Crude Oil for fourth quarter of 2014 downwards to $93 per barrel from $106/bbl and 2015 forecasts to $96/bbl from $107/bbl levels.However Brent-WTI crude differentials will maintain as earlier forecasted at $8 for Q4 2014 and $7 for 2015.Among the reasons for decline in prices , Barclays notes that despite a lower call on OPEC, Saudi Arabia has maintained elevated production levels, and other OPEC producers have raised output.

"For once, refinery margins have rebounded in Asia and Europe, leading to higher crude demand. It remains to be seen how export levels have changed in September and October and how end-user demand will evolve in the coming months. These indicators will be the ultimate determinant of how ‘loose’ the market actually is," Barclays noted.

Geopolitical uncertainty and unplanned outages have kept prices elevated despite a softening in oil market fundamentals. However, the last two months have turned the tide. Lower demand growth expectations and higher Atlantic basin supplies have lowered the call on OPEC crude in Q4 14 by 500 kb/d since June. Barclays expects expects the call on OPEC to average 28.5 mb/d in 2015, which is 700 kb/d lower than 2014’s average and more than 1 mb/d below the Q3 call.

Chinese stockbuilding is likely to have kept imports of OPEC oil robust, but at a lower price. Stockbuilding activities are adding a supply cushion for the market, which should help mitigate the impacts of any production cut. The larger these crude stocks become, the bigger the crude oil overhang will be and the longer prices will remain depressed as the market rebalances."On top of weaker fundamentals, our economists expect continued outright US dollar strengthening, which will pressure the oil price downwards," Barclays added.
Source: Barclays