Nordea Commodities Research: Perfect storm for lower oil prices to fade soon
Perfect storm for lower oil prices to fade soon – Bjørnar Tonhaugen is Nordea Markets’ Global Commodity Strategist. Based in Oslo, he is responsible for Nordea’s commodity price forecasts and his main focus is on the oil/energy and metals markets. He has just published a new forecast where we have lowered our baseline average Brent oil price forecast to USD 114/bbl for 2012E and to USD 118/bbl for 2013E.
• Uncertainty surrounding the oil price outlook is higher than in a long time. Medium term oil balances have weakened since March on a combination of weaker demand and higher supply. The lower global growth trajectory now expected slows the pace of oil demand growth recovery. Lower oil prices provide some counterbalance for demand.
• Forward-looking indicators for economic growth and oil demand have turned south in Q2, while OPEC has flooded the market with oil ahead of the Iran embargo. We expect the market to re-focus on the limited effective spare capacity when crude stock draws occur in H2.
• We still believe EU/US sanctions and oil embargo against Iran to go ahead from 1 July and the risk premium to increase in H2 from very low levels currently.
In our baseline scenario, we expect the near “perfect storm” for oil prices to fade soon and prices to regain momentum in Q3 and onwards on a combination of tightening oil fundamentals and renewed tensions between Iran and the West.
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