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

In its latest report, entitled 'The Oil Market - Quarterly Outlook July 14', the company points out that the risk of oil supply disruptions (and thus higher oil prices) has increased since its last report in April with both Iraq and Ukraine taking headlines.

"Returning to a peaceful situation in Iraq seems difficult and currently unlikely. Adding to expectations of higher oil prices is the that top-oil consumer U.S. seems to be heading out of the financial crisis with recent decent key data. Though Europe is behind in the economic recovery race, the European Central Bank has recently taken (easing) measures to turn that around and return to growth," Global Risk says.

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 Q3 2014 - Rating: 50 (-5 vs April 2014).

Global Risk says: "The security situation in Iraq is deteriorating and the risk of supply disruptions has increased. Though this is not our main case scenario, we look at options to offset this potentially missing oil supply; turning to Nigeria, Saudi Arabia and the U.S. shale production."

Financials Q3 2014 - Rating: 55 (+5 vs April 2014).

Global Risk says: "The European Central Bank (ECB) is loosening the monetary policy, while the U.S. central bank (FED) is currently scaling down the easing measures month-by-month. While Europe still sees staggering economies, the U.S. seems to be heading out of the financial crisis."

Geopolitics Q3 2014 - Rating: 60 (same vs April 2014).

Global Risk says: "Again, Iraq is in focus. The second-largest oil producer in OPEC is an important player and a further increase or even spreading of the unrest would affect oil prices to the upside. The other bullish geopolitical dark horse is Ukraine; standing between Russia and the EU."

GOSI - Rating: 55 (same vs April 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)

Q3 2014 - 111
Q4 2014 - 111
Q1 2015 - 111
Q2 2015 - 111

3.5% Rotterdam Barges (US$ per tonne)

Q3 2014 - 580
Q4 2014 - 587
Q1 2015 - 597
Q2 2015 - 603

0.1% CIF NWE Cargoes (US$ per tonne)

Q3 2014 - 909
Q4 2014 - 916
Q1 2015 - 920
Q2 2015 - 924

380cst Singapore Cargoes (US$ per tonne)

Q3 2014 - 600
Q4 2014 - 603
Q1 2015 - 616
Q2 2015 - 610

0.5% Singapore Gasoil (US$ per tonne)

Q3 2014 - 900
Q4 2014 - 900
Q1 2015 - 901
Q2 2015 - 903

3% US Gulf Waterborne (US$ per tonne)

Q3 2014 - 584
Q4 2014 - 591
Q1 2015 - 597
Q2 2015 - 603

N2 Heating Oil (US$ per tonne)

Q3 2014 - 920
Q4 2014 - 924
Q1 2015 - 928
Q2 2015 - 931