Wed 2 Oct 2013 08:23

Q4 report forecasts slight rise in oil prices


Oil price report forecasts bullish fundamentals and a neutral geopolitical and financials rating.



Denmark-based A/S Global Risk Management has forecast a slight increase in oil prices over the next three months.

In its latest report, entitled 'The Oil Market - Quarterly Outlook October 13', the company estimates that the average Brent price during the fourth quarter of 2013 will be $108 per barrel.

Commenting on the next three months, Global Risk said: "We estimate slightly higher average oil prices ahead. As demand for oil is at all-time high, non-OPEC supply – especially the shale oil boom - has prevented a massive oil price spike. The financial outlook is improving, i.e. the world seems to be slowly escaping the financial crisis; but the U.S . debt ceiling debate could create some price outliers until the situation is resolved. The ongoing talks between the West and Iran regarding the latter's nuclear program is continuously the number one geopolitical dark horse for oil prices."

The Global Oil Strength Index (GOSI)

The Global Oil Strength Index, or GOSI, was introduced by Global Risk in 2010. The GOSI is a single number between 0 and 100 that signals Global Risk Management’s expectations for the development of oil prices. A reading below 50 indicates a declining trend and above 50 an increasing trend.

Global Risk calculates the GOSI by assigning a strength rating or index for each of three factors (Fundamentals, Financials and Geopoliticals) and then calculating a weighted average based on the three strength ratings.

Fundamentals – covering the supply and demand balance.
Financials – covering speculators’ interest and the development of the financial market.
Geopolitics – covering the situation in unstable oil producing regions of the world.

Fundamentals - Q4 2013: Rating: 60 (+5 vs July 2013). Global Risk says that shale oil is keeping a lid on oil prices and that without shale oil and OPEC’s excess production, oil prices would have been significantly higher. The company has therefore set fundamentals to moderately bullish for oil prices.

Financials - Q4 2013: Rating: 50 (-10 vs July 2013). Global Risk says that the main financial driver at the moment is the possible tapering of the QE3 in the U.S. The company does not think that it is likely that the tapering will occur during the remainder of this year. Financials have therefore been forecast as neutral/supportive for oil prices.

Geopoliticals - Q4 2013 Rating: 50 (-10 vs July 2013). The fear of unrest spreading from Syria to other Middle Eastern countries is reduced, says Global Risk. The agreement to destroy Syria’s chemical weapons as well as Iran and the U.S. almost agreeing to meet, makes the geopolitical situation neutral for oil prices, the company concludes.

GOSI - Rating: 53 (-12 vs July 2013) - The GOSI remains above the 50 level, indicating that Global Risk's oil price expectation is bullish.

Average price forecasts:

Brent Crude (US$ per barrel)

Q4 2013 - 108
Q1 2014 - 110
Q2 2014 - 112
Q3 2014 - 110

3.5% Rotterdam Barges (US$ per tonne)

Q4 2013 - 587
Q1 2014 - 616
Q2 2014 - 632
Q3 2014 - 622


0.1% CIF NWE Cargoes (US$ per tonne)

Q4 2013 - 918
Q1 2014 - 938
Q2 2014 - 954
Q3 2014 - 939

380cst Singapore Cargoes (US$ per tonne)

Q4 2013 - 612
Q1 2014 - 631
Q2 2014 - 652
Q3 2014 - 645

0.5% Singapore Gasoil (US$ per tonne)

Q4 2013 - 898
Q1 2014 - 913
Q2 2014 - 928
Q3 2014 - 913

3% US Gulf Waterborne (US$ per tonne)

Q4 2013 - 584
Q1 2014 - 610
Q2 2014 - 629
Q3 2014 - 619

N2 Heating Oil (US$ per tonne)

Q4 2013 - 931
Q1 2014 - 954
Q2 2014 - 969
Q3 2014 - 950



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