Mon 1 Oct 2012, 07:52 GMT

Report revises oil price outlook upwards


Oil price forecast is revised higher due to bullish fundamentals and financials.



Denmark-based A/S Global Risk Management has revised its quarterly outlook for oil prices higher due to bullish fundamentals and financials.

The company says it expects to see an increase in oil prices over the next year and points out that two out of three factors are bullish - fundamentals due to the risk of supply disruption and financials due to the risk of inflation.

Global Risk sees biofuel as a wildcard. The company says that the 'potentially failed' biofuel project in Europe (reports show that bio fuel pollutes more than conventional fuels), can spur immediate demand for lighter products such as diesel.

With a total European biofuel market of 10,000,000,000 litres per year, demand for conventional diesel /gasoline could increase dramatically if the EU decides to pull the plug on subsidies for biofuels.

"The dark horse is biofuel which was introduced primarily for environmental reasons, but now seems to be polluting more than conventional fuel. This could spur demand for lighter products in a situation with low inventories," Global Risk says.

Distillate fundamentals are said to be very bullish due to low inventories. European distillate inventories are at their lowest seasonal levels since 2004, and should the need for diesel/heating oil pick up as temperatures drop, Global Risk estimates a bullish scenario for prices.

Geopolitics have been set as neutral for oil prices. There is a risk of a military escalation in the Strait of Hormuz, which would immediately affect oil prices to the upside.

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: 65 (+25 vs June 2012). According to the report, the supply/demand situation appears to be walking a tightrope and biofuel is a wildcard that could spur demand for lighter products.

Financials: - Rating: 60 (unchanged vs June 2012). The report says that the fact that central banks around the world are trying to 'ease the pain' increases inflation fears, which could in turn lead to higher oil prices. Debt issues continue to draw prices in the opposite direction.

Geopoliticals - Rating: 75 (-5 vs June 2012). The report concludes that the risk of a military escalation in the Strait of Hormuz and the 'non-event' third round of negotiations on Iran’s nuclear program keep geopolitics at a highly bullish GOSI number.

GOSI - Rating: 67 (+7 vs June 2012) - The 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)

Q4 2012 - 112
Q1 2013 - 114
Q2 2013 - 116
Q3 2013 - 117
3.5% Rotterdam Barges (US$ per tonne)

Q4 2012 - 651
Q1 2013 - 660
Q2 2013 - 670
Q3 2013 - 678

0.1% CIF NWE Cargoes (US$ per tonne)

Q4 2012 - 961
Q1 2013 - 983
Q2 2013 - 983
Q3 2013 - 986

380cst Singapore Cargoes (US$ per tonne)

Q4 2012 - 673
Q1 2013 - 679
Q2 2013 - 686
Q3 2013 - 692

0.5% Singapore Gasoil (US$ per tonne)

Q4 2012 - 931
Q1 2013 - 946
Q2 2013 - 961
Q3 2013 - 969

3% US Gulf Waterborne (US$ per tonne)

Q4 2012 - 651
Q1 2013 - 660
Q2 2013 - 671
Q3 2013 - 676

N2 Heating Oil (US$ per tonne)

Q4 2012 - 960
Q1 2013 - 980
Q2 2013 - 975
Q3 2013 - 974



Titan Optimus alongside Peony Leader vessel. FuelEU pooling drives surge in bio-LNG demand, Titan analysis finds  

Clean fuel supplier's modelling shows pooling mechanism turning overcompliance into tradable value for LNG-fuelled ships.

Keith Johnstone, Lloyd’s Register. Ports told to prepare now for advanced nuclear power  

Joint paper sets out a readiness pathway for ports facing nuclear-powered vessels, floating reactors and small modular units

Terra Clove vessel. Eastern Pacific Shipping takes delivery of first ammonia dual-fuel VLAC  

Terra Clove powered by first Everllence B&W 6G60ME-C10.5-LGIA ammonia dual-fuel two-stroke engine.

BV grants type approval to WinGD. Bureau Veritas approves WinGD's variable compression ratio technology for dual-fuel engines  

Classification society grants type approval to engine technology enabling compression ratio adjustment across different marine fuels.

Joe Kramek, WSC. Dual-fuel fleet passes 500 ships as investment tops $200bn  

World Shipping Council data shows dual-fuel container ships and vehicle carriers growing fast, with IMO rules uncertain.

VPS Carbon Reduction seminar in Athens graphic. VPS to host Athens seminar on fuel efficiency and carbon reduction  

VPS's final European round table of 2026 will cover marine fuels, lubricants and decarbonisation in Athens.

Aurora Botnia vessel. Wasaline secures locally produced biogas supply from St1 Biokraft for Vaasa–Umeå ferry  

Agreement will supply 42 GWh of liquefied biogas annually, with deliveries due to start in January 2028.

Kypros Island delivery ceremony. Safe Bulkers takes delivery of first dual-fuel methanol Kamsarmax newbuild  

Kypros Island becomes the first dual-fuel bulker to enter the Cyprus Registry.

Singapore waterfront skyline. PetroChina seeks LNG bunker trader to expand Asian marine fuel business  

Role requires five to ten years of commercial experience in LNG, bunker trading, marine fuels, commodities, or energy trading.

Shanghai–Melbourne Green Shipping Corridor (GSC). Shanghai and Melbourne ports move green shipping corridor into delivery phase  

Ports launch implementation plan targeting green methanol, biofuels and shore power by 2035.