7/29/2019 Crude Oil 08-21-13 Eng

1/1

WITH THE FEAR OF CRUDE OIL SUPPLY

SHORTAGE PRICES MAY WITNESS $115

With

decrease

in the

global

crude

production

during

first six

months of

the current year, several analysts have been forced

to change their short term price forecast. In a note

dispatched to its clients, Goldman Sachs has stated

contrary to the expectation of increase in the global

production by 485000 barrels per day, till datedaily average production has increased merely by

116000 barrels. It further stated that crude and

petroleum stock in the industrial economy also

gone below the average of last five years. Due to

this note of Goldman, several banks are surprised.

Such gaps in the supply would be supportive for

short term crude oil prices.

With the security staff on strike, the Libyan

government has declared lock-out at four portsfrom 16th August. State-owned National Oil

Corporation has stopped the export of crude and

refined products. In the midst of civil war like

situation in Libya, which started from 2011, during

last month only 800000 barrels per day crude

could be produced, which was 50% less than July,

2012. The US crude inventories probably shrank

by 1.25 million barrels to 359.2 million last week,

the lowest since September, according to a survey

before a report from the Energy Information

Administration.

According to Goldman Sachs Bank, such

disruptions in the production would continue,

which would enable Brent crude futures to touch

the peak of $115 per barrels. It has increased its

short term forecast for next three months from

$105 to $110. Societe Generale SA has increased

its quarterly forecast to $111, while BNP Paribas

has increased average price estimate for the fourth

quarter from $111 to $115. However, considering

the powerful sources of Goldman Sachs foracquiring information from the market, traders

give more importance to its forecast as more

reliable.

Goldman is renowned in the commodity market for

making impressive forecast since 2005. At that

time it had predicted that crude oil prices would

increase to $150 from $50. But the bank retreated

from its bullish view on oil prices last October,

when it said surging supplies from the US and

Canada would anchor long-term prices at about

$90 a barrel. During that period, at one end, there

was steady increase in the production in North

America, while at other end the shale gas

revolution had changed the direction & course in

the US. But now, the analysts of Goldman Sachs

believe that the global supply growth has slowed-

down more than their expectation.

In spite of raising short term prediction, theymaintained 12 months forecast of $110 a barrel.

According to them, if there would be increased

shortage of crude in the market then the US

government would release oil from its emergency

stock. With prices moving northwards, refineries

would reduce crude processing, which would show

decline in the demand. Due to high prices, spot

margins of refineries have declined. However,

following crash in crude prices during April, their

profit has gone up. According to PNB Paribas, it is

less likely that prices would decrease in the short

term. Date: 21-8-13

www.commnewspreviews.com