logo
  Join        Login             Stock Quote

Oil Prices Set To Tumble Next Year

 December 14, 2012 03:27 PM


(By Mani) The Organization of the Petroleum Exporting Countries (OPEC) seems to be happy with oil price levels for now, but unsure on what to do when fundamentals weaken in 2013.

As expected, OPEC decided to keep its production quota unchanged at 30 million barrels per day (mb/d) at its Dec.12 meeting, apparently comfortable with current prices. The group has produced an average 31.5 mb/d this year as Saudi Arabia ramped up production to calm prices and offset Iranian crude exports curtailed due to sanctions.

As usual, OPEC highlighted risks to the global economy as a concern, vowed to continue to monitor market developments and hinted it was keeping an eye on surging North American oil production.

Meanwhile, Europe's cold winter – especially compared to last year's warm one – is boosting oil demand. The US Fed's announcement that it will effectively double its current QE3 program to an injection of $85 billion per month and keep this and low interest rates in place until unemployment fell, also gave a fillip to oil prices.

[Related -A Lesson For the Bears From 2007]

Oil was trading Friday at $86.20. up 31 cents, or 0.36 percent.

"However, expected strong supply growth in 2013 will put pressure on Saudi Arabia and other key OPEC members to curb production by around 0.5-1 mb/d in order to balance markets, while still allowing some restocking and assumed Chinese SPR fill of at least 0.2 mb/d," UBS strategist Julius Walker wrote in a note to clients.

In addition, the US State Department extended waivers on financial sanctions for key Asian purchasers of Iranian crude this week, including China, India, South Korea and Turkey which, with Japan, receive the bulk of Iranian crude exports. Japan, together with EU countries, had already received their next 180-day waiver in September.

[Related -Google: Still Opportunities Ahead]

Short-term risks to oil price levels stem from the deterioration in Syria and the approaching fiscal cliff, implying that prices set to fall unless Saudi acts

"We still think Brent crude prices will dip to average $100/bbl in 1Q2012 as fundamentals ease – OPEC producers would need to be cutting production now to have a significant impact on 1Q balances," Walker said.

Having said that, risks remain to the upside due to ongoing tensions in a range of Middle Eastern hot-spots. As political protests continue in Egypt, news reports indicated Syrian forces had fired Scud missiles at opposition fighters, though the missiles were not thought to carry chemical weapons.

This may be a sign of weakness though as statements by both the Russian authorities and NATO suggested this week that the opposition was gaining in strength.

However, the main risk to the downside stems from the possibility of the US going over the fiscal cliff as politicians fail to agree on a deal before the end of the year
iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageA Lesson For the Bears From 2007

Bears almost never get a top where they want it. During 2007, the S&P 500 fell below its 200-day moving read on...

article imageGoogle: Still Opportunities Ahead

Google (GOOGL) shares are finally recovering after announcing third-quarter earnings last week that were read on...

article imageThis Technical Indicator May Be The Simplest Way To Pick Winning Stocks

What's the first rule of successful real estate investing? Of course, you just said to yourself, "location, read on...

article imageUpdate On Crude Oil Markets

Crude prices came under pressure again today. According to Reuters (from last week), the Saudis “will read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.