Brent crude oil prices could climb to $120/bbl by December 2012 on stimulus measures and supply outages in key regions, according to Bank of America-Merrill Lynch. The outpouring of central bank liquidity should provide a boost to depressed global business confidence. “Monetary easing will likely translate into rising capital flows to emerging markets (Ems), creating upside pressure on EM currencies and in turn EM demand for real   assets, including oil.
On the back of the improved momentum in the global economy and a tight supply side for oil, BofAML has raised its average 4Q2012 forecasts for Brent curde to $114/bbl from $108/bbl.
On the supply side, a series of outages stretching from the North Sea, Yemen, Syria, China to Brazil provides firm support to Oil complex. The recent planned and unplanned disruptions amount to over 1.2 million b/d compared to last year. As a result, Brent spreads have strengthened, despite the upcoming refinery maintenance season. Given these continuous disruptions, non- OPEC oil supply growth is expected to grow by just 0.2 million b/d on average in 2H12, down from 0.6 million b/d in 1H12. Should prices head higher despite the noise of Saudi riding to the rescue, concerns on spare capacity may come back, BofAML report said.
For oil, China remains the focal point. Having delivered 40% of oil demand growth in the last two years it is hard to foresee a pick-up in global oil demand without stabilization in China. Chinese crude oil imports have literally collapsed last month, to 4.3 million b/d, the weakest level since October 2010, BofAML report said.
Source: BofAML (Bank of America-Merrill Lynch)