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Denmark-based A/S Global Risk Management has forecast neutral oil price levels during the fourth quarter of 2014 and pointed out that it is the U.S. shale oil boom that has been keeping oil prices at low levels despite oil demand reaching a record high.

In its latest report, entitled 'The Oil Market - Quarterly Outlook Oct 14', the company says: "Despite sluggish economies in Europe and apparent slowdown in Chinese growth, world oil demand has hit [an] all-time high. Had it not been for the U.S. shale oil boom, oil prices could have been well above $120 level [sic]. Current oil prices make some OPEC members consider adjusting the output level in order to curb the drop.

"The central banks around the globe cope with the crisis in very different ways; the FED stating that it will keep interest rates near zero for a 'considerable' time before commencing rate hikes; the ECB implementing rates near or below zero. The geopolitical situation in Libya is still fragile, but oil output in the country is increasing. Iraq sees increased fighting, and Iran is still hit by sanctions with production around 1 mbpd below pre-sanction levels.

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 Q4 2014 - Rating: 50 (same vs July 2014).

In the report, Global Risk said: "The U.S. shale oil boom keeps oil prices from skyrocketing - for now the market seems balanced, but world oil demand has hit all-time high. OPEC could make its first output adjustment in multiple years at the November meeting in order to curb the recent oil price drop."

Financials Q4 2014 - Rating: 45 (-10 vs July 2014).

Global Risk said: "The Fed kept interest rates near zero at the September meeting and will do so for a “considerable” amount of time. In Europe, the ECB could announce further interest rate cuts in response to the continued weakness in the European economy."

Geopolitics Q4 2014 - Rating: 55 (-5 vs July 2014).

Global Risk said: "Libyan oil production has increased lately, but is still very fragile with strikes and rocket firing cutting off output from time to time. Iraq is experiencing increasing fighting and Iran is still affected by the sanctions due to the nuclear programme."

GOSI - Rating: 50 (-5 vs July 2014) - The GOSI is at the 50 level - indicating that Global Risk's oil price expectation is neutral.

Average price forecasts:

Brent Crude (US$ per barrel)

Q4 2014 - 100
Q1 2015 - 101
Q2 2015 - 102
Q3 2015 - 102

3.5% Rotterdam Barges (US$ per tonne)

Q4 2014 - 543
Q1 2015 - 546
Q2 2015 - 552
Q3 2015 - 546

0.1% CIF NWE Cargoes (US$ per tonne)

Q4 2014 - 838
Q1 2015 - 846
Q2 2015 - 857
Q3 2015 - 857

380cst Singapore Cargoes (US$ per tonne)

Q4 2014 - 572
Q1 2015 - 572
Q2 2015 - 565
Q3 2015 - 559

0.5% Singapore Gasoil (US$ per tonne)

Q4 2014 - 831
Q1 2015 - 834
Q2 2015 - 842
Q3 2015 - 842

3% US Gulf Waterborne (US$ per tonne)

Q4 2014 - 552
Q1 2015 - 559
Q2 2015 - 559
Q3 2015 - 559

N2 Heating Oil (US$ per tonne)

Q4 2014 - 834
Q1 2015 - 846
Q2 2015 - 857
Q3 2015 - 860