Banks sharply differ on future crude oil prices

24 September 2009 20:39  [Source: ICIS news]

LONDON (ICIS news)--Crude oil prices could drop down to $50/bbl by the end of the year due to high inventory levels, according to a bank's analysis released on Thursday, but another pointed to higher prices as a result of improved demand and tight supply.

A report from Commerzbank, which forecast a drop in crude prices by the end of this year, was based on the large builds in both crude and product stocks found in this week’s data from the US Energy Information Administration (EIA).

“The data supports [sic] our expectation of a decline in oil prices. High stocks for oil products should result in refineries processing less crude in the weeks and months ahead,” according to the Commerzbank report.

“Crude stocks, already high, should increase, as oil supply is unlikely to be reduced further. We envisage oil at $50/bbl a barrel at year-end.”

Prices fell by about $2/bbl on 23 September when the weekly US stock figures showed an increase in oil stocks of 2.8m bbl against analysts’ expectations of a 1.5m bbl decrease.

Gasoline was expected to fall by around 700,000 bbl, while the data showed an increase of 5.4m bbl.

However, other banks see a different picture. Barclays Capital said in a commodity research paper it expected prices to move up.

“After a relatively stable phase for oil prices…since early August, we see momentum starting to build for a break to the upside. Oil stocks remain elevated, but the excess of inventories over average levels for the time of the year is eroding, and this process should accelerate as demand improves while supply remains relatively tight,” the Barclays Capital report stated.

In a report issued after this week’s release of the EIA stocks figures, BNP-Paribas questioned the value of comparing this year's US demand situation with that of last year.

Although only referring to the US market, the BNP-Paribas report stated: “Year-on-year comparisons in US total product demand provide a deceptive sense of recovery given a 2008 base distorted by the poor state of gasoline demand then.”

The oil markets extended the losses on Thursday to trade at one point more than $3/bbl down from the previous day’s settlement prices.

By 15:00 GMT, November Brent was trading at $65.33/bbl, down $2.65/bbl, while November WTI was at $66.34/bbl, down $2.63/bbl.

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By: Giovanni Coiro
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