Commodities | Feb 03 2010
By Chris Shaw
An unexpectedly stronger US dollar and weaker equity prices to start the new calendar year have weighed on oil prices, with crude falling from US$83 per barrel early last month to close last week at US$73 per barrel. According to ANZ Banking Group energy commodity strategist Serene Lim, the price falls may present some opportunities for the bulls to enter the market, though a bottoming in global oil demand, record high stocks and sovereign credit risk in the Euro zone offer reasons for continued caution.
On the plus side for the oil price, Lim notes while stockpiles are at record levels according to US Department of Energy inventory data, a colder winter and higher tanker rates are reducing offshore floating inventories and so improving market fundamentals. This improvement is likely to be enough to support the oil price in Lim’s view, though there remains scope for the market to see some switching from commodities to perceived safer haven asset classes such as the US dollar.
In terms of the 2010 outlook, Lim sees demand of 85.19 million barrels per day as coming in fairly close to OPEC estimates, though it remains on the conservative end of forecasts given lower global economic growth forecasts than consensus for the coming year. Assuming the bank is right with its estimate, this would represent an increase in demand of 0.5 million barrels per day on the 2009 average.
ANZ’s supply side forecasts for oil also track relatively closely to OPEC numbers as it expects OPEC-12 supply to average 28.9 million barrels per day based on the view OPEC will reinforce production compliance if prices move outside of its desired range. This range appears to be in the US$60-$80 per barrel band.
Overall ANZ is forecasting global supply of 85.8 million barrels per day and suggests such an outcome would keep crude balances firm and support product spreads.
Assuming its forecast for market balance plays out in the shorter-term, ANZ suggests the oil price is likely to be range bound or to trend slightly positively in February, so no changes have been made to its March quarter forecast of US$85 per barrel. Extending into the second and third quarters of 2010, ANZ expects prices to trend higher and trade around US$90 per barrel, while the final quarter should see an average price of US$95 per barrel.
For the whole of 2010 ANZ’s forecast is for prices to average US$90 per barrel.