Thu 3 Apr 2014, 12:37 GMT

Quarterly oil market report released


Report looks at fundamentals, financials and geopolitical factors in quarterly oil market analysis.



Denmark-based A/S Global Risk Management has forecast a slightly bullish oil market during the second quarter of 2014.

In its latest report, entitled 'The Oil Market - Quarterly Outlook April 14', the company points out that oil supply from both OPEC and non-OPEC countries is stable, primarily due to Saudi Arabia's production policy and the U.S. shale oil boom.

Global Risk adds that oil demand is still picking up as growth forcasts for the U.S. and Europe are improving. Though losing pace, Chinese growth is said to be "still considerable".

"Some OPEC members have struggled with supply disruptions, but Saudi Arabia has ensured a stable overall OPEC oil output. Non-OPEC supply is expected to continue the strong growth in 2014; lead by the U.S. shale oil boom. On the demand side, we see improved economic situation for the U.S. and Europe (the latter a bit more fragile)- Chinese growth seems to be losing pace, but oil demand is still expected to rise by around 4% this year.

"The era of Fed’s money printing seems over; whether it will affect oil prices depends on how the market interprets the ending of QE and the increasing interest rates.

"The major geopolitical topic the coming months is obviously Crimea. Our base case scenario is for a peaceful solution. Iran is exporting more oil than agreed in the "interim deal" for November 2013; we anticipate a 6-month's extension when the interim deal expires," Global Risk said.

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 weighted average based on the three strength ratings.

Fundamentals – covering the supply and demand balance.
Financials – covering speculators’ interest and the development of the financial market.
Geopolitics – covering the situation in unstable oil producing regions of the world.

Fundamentals Q2 2014 - Rating: 55 (same vs January 2014). Market fundamentals and Saudi Arabian production policy support stable oil prices in 2014. Some downside risk of non-OPEC output and global oil demand growth remains around 1.4 mbpd, Global Risk says.

Financials Q2 2014 - Rating: 50 (+5 vs January 2014). Global Risk says: "For almost half a decade the U.S. central bank has printed additional money every month - markets are now wondering when interest rates will start increasing."

Geopoliticals Q2 2014 - Rating: 60 (same vs January 2014). According to Global Risk, the situation in Crimea is the major geopolitical issue at the moment. Other geopolitical issues to watch include Iran, Libya and Venezuela.

GOSI - Rating: 55 (+2 vs January 2014) - The GOSI remains above the 50 level, indicating that Global Risk's oil price expectation is bullish.

Average price forecasts:

Brent Crude (US$ per barrel)

Q2 2014 - 108
Q3 2014 - 109
Q4 2014 - 109
Q1 2015 - 109

3.5% Rotterdam Barges (US$ per tonne)

Q2 2014 - 582
Q3 2014 - 591
Q4 2014 - 594
Q1 2015 - 597

0.1% CIF NWE Cargoes (US$ per tonne)

Q2 2014 - 913
Q3 2014 - 924
Q4 2014 - 928
Q1 2015 - 931

380cst Singapore Cargoes (US$ per tonne)

Q2 2014 - 603
Q3 2014 - 613
Q4 2014 - 616
Q1 2015 - 619

0.5% Singapore Gasoil (US$ per tonne)

Q2 2014 - 908
Q3 2014 - 913
Q4 2014 - 913
Q1 2015 - 909

3% US Gulf Waterborne (US$ per tonne)

Q2 2014 - 578
Q3 2014 - 597
Q4 2014 - 591
Q1 2015 - 597

N2 Heating Oil (US$ per tonne)

Q2 2014 - 924
Q3 2014 - 935
Q4 2014 - 939
Q1 2015 - 939


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