Analysts Predict Average Crude Prices to Further Drop in 2013

Slow growth of the economy and sufficient supplies are expected to control oil in 2013 with the current crude prices already dropping slightly.

However, according to analysts surveyed by Reuters, it is unlikely for a crash in the oil price per barrel to occur, and concerns on the geopolitical condition should provide support to the market.

In a monthly poll of Reuters to 36 analysts, the price of Brent crude is expected to average $108 a barrel next year. That is lower compared to this year’s average of $111.71.

The survey showed that the current crude price of Brent is predicted to further drop to $105.90 by 2014.

From three analysts in the survey last month, the current poll already has four analysts projecting the average price of Brent to be greater than $115 in 2013.

The demand for oil is expected to modestly improve in the second half of next year. However, analysts say that greater supply will restrict any rise in prices.

Forecasters predicting higher prices put their hopes on better economic background in the U.S. and China.

The highest 2013 price forecast for Brent was from First Energy at $130.50 a barrel, while the lowest was from Raymond James at $80.

The average price of the U.S. benchmark next year is projected lower from last month’s survey of $94.70 to the current one at $93.90.

While the survey shows a fall in next year’s prices, a majority of analysts argue that there is a very low possibility for the prices to crash.

Mark Pervan, Commodity Strategy’s global head at ANZ, argued that the geopolitical risks on Middle Eastern supplies will continue to support the prices of Brent.

Julian Jessop, Capital Economics’ Commodities Research Head, said that there may be a significant drop in the price of oil in case a global financial shock occurs, like the euro’s break-up.

Middle Eastern tensions are anticipated to reign during next year’s first half but would ease moving into the second half, said Energy Economist Hans van Cleef of ABN Amro.

By: Chris Termeer