Mon 2 Jul 2012, 10:02 GMT

Report revises oil price outlook downwards


Prices revised downwards but report forecasts that prices will stabilize and inch upwards in the months ahead.



Denmark-based A/S Global Risk Management has revised its quarterly outlook for oil prices signifantly downwards due to the renewed financial turmoil and the boost in Saudi Arabian production.

The company points out, however, that current price levels are hurting many oil producers and that bad demand news has already been factored into prices. Global Risk forecasts that prices will stabilize and inch upwards in the months ahead.

"Dark horses are the increasingly tense situation in Syria - an escalation of unrest in the area could affect oil prices - and the effect of the bans and sanctions against Iran taking effect in July," the company also adds.

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 weigthed average based on the three strength ratings.

Fundamentals: - Rating: 40 (-22 vs Apr 2012) - In combination with OPEC ramping up production, the US has experienced a large increase in its production as well. The extra supply has been weighing on prices.

Financials: - Rating: 60 (+6 vs Apr 2012) - Central banks have been printing money. A bullish factor in the long run.

Geopoliticals - Rating: 80 (-5 vs Apr 2012) - Syria is a lit powder keg. Big nations disagree on how to handle the situation. Iranian nuclear dispute supports prices.

GOSI - Rating: 60 (-5 vs Apr 2012) - Financial turmoil and boosted Saudi Arabian oil production are weighing oil prices down. GOSI is still above the 50 level, indicating that Global Risk's oil price expectation is bullish.

Average price forecasts:

Brent Crude (US$ per barrel)

Q3 2012 - 97
Q4 2012 - 102
Q1 2013 - 105
Q2 2013 - 107

3.5% Rotterdam Barges (US$ per tonne)

Q3 2012 - 565
Q4 2012 - 584
Q1 2013 - 597
Q2 2013 - 610

0.1% CIF NWE Cargoes (US$ per tonne)

Q3 2012 - 833
Q4 2012 - 872
Q1 2013 - 895
Q2 2013 - 913

380cst Singapore Cargoes (US$ per tonne)

Q3 2012 - 578
Q4 2012 - 603
Q1 2013 - 616
Q2 2013 - 629

0.5% Singapore Gasoil (US$ per tonne)

Q3 2012 - 820
Q4 2012 - 857
Q1 2013 - 879
Q2 2013 - 894

3% US Gulf Waterborne (US$ per tonne)

Q3 2012 - 565
Q4 2012 - 584
Q1 2013 - 594
Q2 2013 - 600

N2 Heating Oil (US$ per tonne)

Q3 2012 - 819
Q4 2012 - 857
Q1 2013 - 879
Q2 2013 - 894



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