Wed 7 Oct 2015 11:37

Fourth-quarter oil market report released


Report forecasts bullish oil prices during the fourth quarter of 2015.



Denmark-based A/S Global Risk Management has forecast bullish oil price levels during the third quarter of 2015.

In its latest report, entitled 'The Oil Market Quarterly Outlook Oct 15', Global Risk analyses how the lifting of sanctions against Iran could affect the supply/demand balance in the oil market, and the impact of a postponement of an interest rate hike in the U.S.

The firm explains: "Since our last Quarterly Outlook in July, oil prices have dropped on global supply glut and mediocre economic growth outlook around the globe.

"Oil supply grows faster than oil demand at the moment - with OPEC and Russia production at record-levels and U.S. shale oil production keeping up pace being main reasons for the excess global oil supply.

"On the financial front, the traditional growth engine China seems to be slowing down pace and this spills over to the rest of the world; e.g. the U.S. where the central bank refrained from raising interest rates with comments to global economic headwinds. Now the guessing game is on as regards the timing of a potential interest rate hike in the U.S.

"The upcoming lifting of sanctions on Iran is one of the hottest topics oil-market-wise as this could add additional oil to an already well-supplied oil market. Potentially, up to 600,000 barrels per day could come online in 2016, should sanctions be lifted within the coming 4-6 months."

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: Oct 2015 - Rating: 52 (vs 45 in its July 2015 forecast).

In the report, Global Risk said: "Oil supply is plenty at the moment; we could see Iran exports increase as sanctions are lifted - on the other hand, countries like Libya and potentially Iraq could experience set-backs in production due to unrest. Also the number of active drilling rigs in the U.S. seems to be on the way down for now. So we set fundamentals to slightly bullish."

Financials: Oct 2015 - Rating: 51 (vs 45 in its July 2015 forecast).

Global Risk said: "The financial situation in China dominates the economic market sentiment at the moment - could spill over to the rest of the world in the short term. The postponement of an interest rate hike in the U.S. seems bullish for oil prices."

Geopolitics: Oct 2015 - Rating: 50 (vs 50 in its July 2015 forecast).

Global Risk said: "For now, the geopolitical risk premium is neutral for oil prices."

GOSI - Rating: Oct 2015 - Rating: 51 (vs 47 in its July 2015 forecast) - The GOSI is above 50, indicating that Global Risk's oil price expectation is bullish.

Average price forecasts:

Brent Crude (US$ per barrel)

Q3 2015 - 48
Q4 2015 - 51
Q1 2016 - 53
Q2 2016 - 52

3.5% Rotterdam Barges (US$ per tonne)

Q3 2015 - 214
Q4 2015 - 235
Q1 2016 - 248
Q2 2016 - 244

0.1% CIF NWE Cargoes (US$ per tonne)

Q3 2015 - 460
Q4 2015 - 481
Q1 2016 - 492
Q2 2016 - 484

380cst Singapore Cargoes (US$ per tonne)

Q3 2015 - 236
Q4 2015 - 254
Q1 2016 - 270
Q2 2016 - 264

0.5% Singapore Gasoil (US$ per tonne)

Q3 2015 - 456
Q4 2015 - 484
Q1 2016 - 499
Q2 2016 - 495

3% US Gulf Waterborne (US$ per tonne)

Q3 2015 - 230
Q4 2015 - 251
Q1 2016 - 267
Q2 2016 - 260

N2 Heating Oil (US$ per tonne)

Q3 2015 - 452
Q4 2015 - 477
Q1 2016 - 495
Q2 2016 - 488

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