Thu 7 Apr 2016 14:31

Second-quarter oil market report released


Oil price report gives 'slightly bullish' rating for the second quarter of 2016.



Denmark-based A/S Global Risk Management says it expects to see a slightly bullish market during the second quarter of 2016.

In its latest report, entitled: 'The Oil Market Quarterly Outlook Apr '16', the company says: "Iranian oil flow to the market has increased after the lifting of international sanctions. The first 0.5 mbpd increase came easy, but we expect the remaining 0.5 mbpd to be more time-consuming to restore. Supply disruptions in Iraq and Nigeria, drop in U.S. production along with continued global demand growth could bring supply/demand in balance before the end of the year.

"After the first interest rate hike in years (in Dec 15), the U.S. central bank now seems more dovish. Comments on global growth makes several rate hikes this year less likely. The UK exiting the EU (Brexit) could be a dark horse to oil prices.

"Nigeria and Iraq are experiencing supply disruptions due to unrest and pipeline attacks. Iran is fighting to regain pre-sanctions market shares; an effort which could rock the 'freeze deal' boat.

"Summing up: we are slightly bullish on oil prices; short term there is plenty of oil available, but long term prices could increase as global demand outweighs supply."

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 Q2 2016 - Rating: 50 (same vs January 2016). Global Risk says: "Iranian oil flows again after lifting of sanctions; question is how much and how fast. Shale oil players are in severe difficulties, and along with supply disruptions around the world, we expect supply/demand to balance later this year."

Financials Q2 2016 - Rating: 55 (+3 vs January 2016). Global Risk says: "U.S. central bank less optimistic on global growth; and next interest rate hike does not seem just around the corner. Dark horse to financials is the UK potentially exiting the EU."

Geopolitics Q2 2016 - Rating: 50 (Same vs January 2016). Global Risk says: "Iran plays a key role in the "Freeze Deal" scenario. Nigeria and Iraq are experiencing fighting and pipeline wreckages."

GOSI - Rating: 52 (+1 vs January 2016) - GOSI is above the 50 level - indicating that the oil price expectation is slightly bullish.

Average price forecasts:

Brent Crude (US$ per barrel)

Q2 2016 - 39
Q3 2016 - 42
Q4 2016 - 45
Q1 2017 - 47

3.5% Rotterdam Barges (US$ per tonne)

Q2 2016 - 147
Q3 2016 - 171
Q4 2016 - 191
Q1 2017 - 206

0.1% CIF NWE Cargoes (US$ per tonne)

Q2 2016 - 322
Q3 2016 - 350
Q4 2016 - 373
Q1 2017 - 387

380 cSt Singapore Cargoes (US$ per tonne)

Q2 2016 - 166
Q3 2016 - 191
Q4 2016 - 213
Q1 2017 - 225

0.05% Singapore Gasoil (US$ per tonne)

Q2 2016 - 316
Q3 2016 - 341
Q4 2016 - 365
Q1 2017 - 380

3% US Gulf Waterborne (US$ per tonne)

Q2 2016 - 170
Q3 2016 - 194
Q4 2016 - 216
Q1 2017 - 229

N2 Heating Oil (US$ per tonne)

Q2 2016 - 340
Q3 2016 - 369
Q4 2016 - 391
Q1 2017 - 406


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