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Denmark-based A/S Global Risk Management says it expects to see a bearish market during the first quarter of 2015.

In its latest report, entitled: 'The Oil Market Annual Outlook Jan '15', the company says: "Fundamentals signs are short term bearish but long term very bullish.

"Financials cover the economic situation in the world; from the quantitative easing coming up in Europe and ending in the U.S. to Chinese economy faltering from a higher base and the potential influence monetary policy has on the price on oil. We set financials to slightly bearish.

"The geopolitical situation in the world continues to be affected by unrest and sanctions. In Libya, two governments fight for power impacting oil output; Iran and Russia are affected by sanctions and there is no apparent solution right around the corner. Unrest prevails in Iraq, but the country’s oil production is not yet significantly influenced. We set geopolitics to neutral."

In an analysis of the last quarter, Global Risk says: "The past quarter has been one of the most extraordinary for a long time. A drop in price of around 50% in crude does not come around often. In the past multiple decades it has only happened 3 times (two of which date back more than 20 years and the last one was during 2008). What is different this time around is that the world is not suddenly de-leveraging (like in 2008), or falling back after an oil supply crisis (like the 70’s).

"The 'trigger' behind the drop from 100 to 80 was a mixture of ample supply and uncertainty whether OPEC would decide to cut production or not at the Nov14 meeting. The “trigger” from 80 to 60 was when OPEC decided not to cut production to maintain a certain price level, but instead fight to keep market share. In the view of the aggressive shale oil expansion in the US, OPEC’s decision is perfectly logical – why would they scale back production (and lose market share) just to indirectly subsidize US shale oil players."

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 Q1 2015 - Rating: 45 (-5 vs October 2014). Global Risk says: "Triggers behind the drop over the past months and break-even prices for oil producers. How the supply/demand circle works. We set fundamentals to slightly bearish, but bullish in the long run."

Financials Q1 2015 - Rating: 45 (-10 vs October 2014). Global Risk says: "Monetary policies around the world and the influence monetary measures have on the price of oil. We set financials to slightly bearish."

Geopolitics Q1 2015 - Rating: 50 (-10 vs October2014). Global Risk says: "Unrest in Libya & Iraq continues; sanctions affect Russia and Iran. We set geopolitics to neutral, dark horses being Iraq and Russia."

GOSI - Rating: 47 (-3 vs October 2014) - GOSI is below the 50 level - indicating that the oil price expectation is bearish.

Average price forecasts:

Brent Crude (US$ per barrel)

Q1 2015 - 55
Q2 2015 - 60
Q3 2015 - 62
Q4 2015 - 62

3.5% Rotterdam Barges (US$ per tonne)

Q1 2015 - 257
Q2 2015 - 286
Q3 2015 - 298
Q4 2015 - 292

0.1% CIF NWE Cargoes (US$ per tonne)

Q1 2015 - 503
Q2 2015 - 540
Q3 2015 - 559
Q4 2015 - 559

380 cSt Singapore Cargoes (US$ per tonne)

Q1 2015 - 295
Q2 2015 - 324
Q3 2015 - 330
Q4 2015 - 330

0.5% Singapore Gasoil (US$ per tonne)

Q1 2015 - 518
Q2 2015 - 559
Q3 2015 - 574
Q4 2015 - 574

3% US Gulf Waterborne (US$ per tonne)

Q1 2015 - 259
Q2 2015 - 289
Q3 2015 - 298
Q4 2015 - 298

N2 Heating Oil (US$ per tonne)

Q1 2015 - 499
Q2 2015 - 540
Q3 2015 - 559
Q4 2015 - 562