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New reality of oil market
[DAWN] RIYADH: The oil deluge from Iran is expected any day. Sanctions could be lifted in days. And crude markets are wobbling with its possible impact. Others factors are coming into play too."China macro concerns and to some degree the continued strength of the US dollar have been providing headwinds for the oil markets. The supply side is still very resilient. Demand is not great and inventories are likely to keep getting quite a bit higher," Citi analysts said while summing up the scenario. Markets have lost some 17pc within the first two weeks of 2016. Any additional oil would only add to pressure. Barclays said it had raised its estimates of Iranian oil supply, by almost 700,000 bpd more in the fourth quarter of 2016 than over the same period in 2015, once sanctions are lifted. This has resulted in lowering their forecast for the average price of Brent and WTI in 2016 -- to $37 a barrel this year, down from $60 and $56 previously. "With no apparent signs of strengthening demand, and only further indicators of future global supply growth, the outlook for oil prices is leading most market watchers to ratchet down estimates for oil prices in 2016 and 2017," analysts at Cenkos Natural Resources said. "In the very short term, another price drop cannot be excluded in particular after sanctions against Iran are lifted," Commerzbank analyst Carsten Fritch told Rooters Global Oil Forum. "That means a drop toward $25 is quite possible." "Most of the bearishness is coming from worries over Iranian sanctions being lifted," said Daniel Ang, of Phillip Futures. "I won't be surprised if prices continue falling toward $25 per barrel." Morgan Stanley says WTI will fall to $20 as the US dollar strengthens. That was bullish compared to the one made by RBS for oil to hit $16 a barrel. Standard Chartered is suggesting oil prices to "fall to as low as $10" before the sell-off "had gone too far." A few analysts however, are taking the line that Iran's return would have a muted effect, as it was already priced in by the markets. "The lifting of the sanctions has been widely expected and it is difficult to say that it is not yet priced in Brent at $30 a barrel," said Olivier Jakob of Swiss-based consultancy Petromatrix. Posted by: Fred 2016-01-18 |
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