Barclays has revised their forecast for the average 2013 Brent crude price from $125 per barrel to $112 and for WTI from $108/barrel to $95.“We are revising down our oil price forecasts to reflect what is for now at least a more placid geopolitical environment than we previously expected.” the Bank noted in a report.Barclays' quarterly average forecasts now suggest that the period of recent range trading will continue but “ we would caution against becoming too sanguine about oil’s upside price risks”.
Although US oil production is surging, it is being offset by declines in the rest of non-OPEC and against a troubling backdrop in the Middle East, OPEC’s ability to cushion unforeseen supply disruption remains strictly limited.
Economic pain has brought Iran back to the bargaining table, but its nuclear programme continues and the recent installation of more advanced centrifuges could allow it to rapidly increase its overall enriched uranium stockpile.
If no Iran deal is forthcoming by late spring, Barlays expect the Israeli government at a minimum to begin issuing strong statements calling for tougher international action against Tehran. A move back to more aggressive rhetoric is likely to put upward pressure on oil prices.
In fundamentals, Q2 is likely to see a strong swing up in oil demand as refiners start to return from an unusually early and intense phase of maintenance. China’s oil demand growth this year looks modest by recent standards, but EM oil demand overall is healthy and Barclays forecasts that in Q2 non-OECD oil demand will match that of the OECD for the first time.
Fortunately, stronger oil demand is also likely to be met by better supply. The return of volumes from Sudan, recent improvement in North Sea supplies and a record shipment of crude cargoes by Russia through the Pacific port of Kozmino, are helping to improve the poor performance of non-OPEC so far this year.
Although Barclays forecasts further range trading as the most likely path for oil prices over the quarters ahead, that view is predicated on the extension of a highly fragile equilibrium, and there is no guarantee it will last.
Source: Barclays