FT: “For a third year, international oil prices have gone nowhere. Brent, the global marker, has averaged more than $108 a barrel in 2013 – like it did in 2012 and 2011 – as feared oversupply from the US shale revolution failed to materialise because of production setbacks in other parts of the world.” “For many investors who track commodities, and hedge funds who bet on volatility, this has meant poor returns. For investment banks, it has meant a lack of business as consumers see less need to hedge. Only Opec, the producers’ cartel, has been happy, with consistently high revenues.
So is it time for investors to throw in the towel on Brent, or will 2014 bring anything different? Analysts are divided.
Many believe 2014 will be the year in which rising output finally overwhelms modest demand growth, sending prices lower and testing Opec’s resolve to balance the market and keep prices stable.
“The US shale revolution, coming on top of the maturation of deepwater production, paints a robust supply picture,” says Ed Morse, head of commodities research at Citi. His bank expects Brent to average $98 a barrel in 2014.
Others, though, argue supply will disappoint, providing a powerful prop for Brent.
“The patterns of recent years are likely to repeat themselves because nothing has really changed,” says Michael Dei-Michei of JBC Energy, a consultant which is forecasting an average Brent price of $110 a barrel next year.
Why the opposing forecasts? The main reason is differing views on the risk of more supply disruptions within Opec .
….Others, though, argue supply will disappoint, providing a powerful prop for Brent.
….Why the opposing forecasts? The main reason is differing views on the risk of more supply disruptions within Opec .
….“In eight of the last ten years the International Energy Agency [the developed world’s energy body] has overestimated non-Opec supply growth,” says Tom Nelson, co-portfolio manager of Investec Asset Management’s Global Energy Fund.
…. the IEA recently raised its forecasts for global oil consumption amid the strongest US demand growth in a decade. It is now forecasting global oil demand growth of 1.2m b/d in 2014.”
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