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

In its latest report, entitled: 'The Oil Market Quarterly Outlook Oct '16', the company says: "Brent oil hovering around $50 level. But we have seen huge volatility and prices close to $40 over the last three months.

"The surprise OPEC preliminary agreement to curb oil output has been the main driver behind the recent oil price increase in late September / beginning of October - more details will be revealed at the ordinary OPEC meeting in November. The fundamental supply/demand situation still points to a surplus of oil in the market, dark horse in the equation will be if non-OPEC countries also decide to cut/freeze oil output over the next couple of months.

"The economic situation in the world sees fragile growth signs in the U.S. and Europe. Central banks around the world have implemented various measures to spur economic growth. The U.S. central bank, the Fed, have refrained from additional interest rate hikes - markets remain uncertain of any soon-to-come rate hike.

"Turning to the geopolitical situation, Libya, Iraq and Iran have increased production despite unrest, the Nigerian situation fails to improve as fighting and oil facilities ravages prevail.

"All in all, oil prices seem headed for higher levels in the coming period."

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 2016 - Rating: 50 (same vs July 2016). Global Risk says: "We set fundamentals as neutral in the short run, jokers being that non-OPEC countries decide to cut/freeze production as well and/or more U.S. shale oil comes online as oil prices go up."

Financials: Oct 2016 - Rating: 52 (-3 vs July 2016). Global Risk says: "We set financials as slightly bullish. Dark horse in the financial world could be the U.S. hiking interest rates in December, which there is currently a fifty-fifty probability [that] could happen."

Geopolitics: Oct 2016 - Rating: 53 (+3 vs July 2016). Global Risk says: "We set geopolitics to slightly bullish. Several oil producing countries are struggling to increase or even keep production at current levels due to unrest/oil facility wreckages and lack of industry investments."

GOSI - Rating: 52 (same vs July 2016) - GOSI is above the 50 level - indicating that the oil price expectation is bullish.

Average price forecasts (by Global Risk Management):

Brent Crude (US$ per barrel)

Q4 2016 - 49
Q1 2017 - 52
Q2 2017 - 53
Q3 2017 - 57

3.5% Rotterdam Barges (US$ per tonne)

Q4 2016 - 227
Q1 2017 - 244
Q2 2017 - 248
Q3 2017 - 270

0.1% CIF NWE Cargoes (US$ per tonne)

Q4 2016 - 428
Q1 2017 - 447
Q2 2017 - 451
Q3 2017 - 477

380 cSt Singapore Cargoes (US$ per tonne)

Q4 2016 - 237
Q1 2017 - 257
Q2 2017 - 264
Q3 2017 - 289

0.05% Singapore Gasoil (US$ per tonne)

Q4 2016 - 424
Q1 2017 - 440
Q2 2017 - 447
Q3 2017 - 477

3% US Gulf Waterborne (US$ per tonne)

Q4 2016 - 234
Q1 2017 - 257
Q2 2017 - 267
Q3 2017 - 292

N2 Heating Oil (US$ per tonne)

Q4 2016 - 416
Q1 2017 - 443
Q2 2017 - 451
Q3 2017 - 481