DNB sees Brent above $100 in 2013, despite short term weakness

DNB Markets’ latest macro update predicts that despite the Brent price of oil being tested by weaker supply and demand factors, it will still average above $100 per barrel through 2013.

This would still leave the price some $5 below the average for 2012, the Norwegian bank adds.

Geopolitical risk, potential cuts in output from Saudi Arabia, and liquidity moves by central banks will support the market it said, and therefore lends support to its forecast of $107 oil first made back in August 2012.

It predicts a short-term recovery in the Brent price following falls seen through the first months of this year. DNB adds that its predictions are among the more conservative of its Norwegian peers. The range of price highs and lows through the next five years are illustrated below.

 

brent2

 

Oil at $120?

DNB’s predictions also appear conservative on the upside.

Angelos Damaskos, CEO of Sector Investment Managers and fund adviser to Junior Oils Trust, said supply fundamentals pointed to a recovery towards $120.

“At the time of writing the oil price is trading just below $100/barrel, the level that Saudi Arabia has stated it wishes to defend. In the meantime, the International Energy Agency has increased its forecasts for demand growth and statistics indicate that crude oil inventories declined by about six million barrels year on year. While the fundamentals point to higher oil prices, short-term sentiment has pushed prices lower. We believe this is unlikely to last and the price of Brent will head to $120/barrel again before long.”

UK based wealth manager Rowan Dartington said the direction of the oil price could be crucial to the outlook for global GDP growth this year. Along with falls in other commodities prices “whilst not particularly welcome for producers, will in time be good news for growth prospects; certainly a failing oil price is particularly welcome in this regard.”

 

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