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Denmark-based A/S Global Risk Management says it expects to see a slightly bullish market during the first quarter of 2016.

In its latest report, entitled: 'The Oil Market Annual Outlook Jan '16', the company says: "Since spring 2015, oil prices have more than halved; basically due to supply of oil growing at a faster pace than demand for oil. Potential additional oil from Iran, when/if sanctions are lifted also weighs on prices. We have revised our outlook of how fast Iranian oil could flow to the markets and estimate that the country will be able to increase production by 500,000 barrels per day within 1-3 months from finalising the deal and close to 1 mio. barrels per day by the end of 2016. Chinese growth pace seems reduced, which could reduce annual global demand "increase" to around 800,000 barrels per day i.e. just around the addition of Iranian oil. However, we expect U.S. shale oil production to decrease over the year since current oil price levels prevent new investments and complicate cashflow of shale oil producers. It is not unlikely that U.S. oil production drops several hundred thousand barrels per day.

"All in all, the most likely scenario in 2016 is oil prices above current level - how much above depends on the pace of Iranian oil flowing back, the resilience of shale oil producers and potential geopolitical events," Global Risk Management adds.

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 2016 - Rating: 50 (-2 vs October 2015). Global Risk says: "Continued oversupply around the world and OPEC leaving price development to market forces. Resilience from shale oil producers remain uncertain. We set fundamentals to neutral."

Financials Q1 2016 - Rating: 52 (+1 vs October 2015). Global Risk says: "Though Chinese growth figures are dwindling, U.S. economy seems on track - we set financials to slightly bullish."

Geopolitics Q1 2016 - Rating: 50 (Same vs October 2015). Global Risk says: "Iran and Saudi Arabia are taking centre stage. One is on its way back into the global oil market and the other defending its market share at what seems to be at any cost. Iraq managed to increase production while Libya is still wartorn and production far below 2011-levels. We set geopolitics to neutral."

GOSI - Rating: 51 (Same vs October 2015) - GOSI is above the 50 level - indicating that the oil price expectation is slightly bullish.

Average price forecasts:

Brent Crude (US$ per barrel)

Q1 2016 - 34
Q2 2016 - 35
Q3 2016 - 37
Q4 2016 - 39

3.5% Rotterdam Barges (US$ per tonne)

Q1 2016 - 124
Q2 2016 - 133
Q3 2016 - 146
Q4 2016 - 162

0.1% CIF NWE Cargoes (US$ per tonne)

Q1 2016 - 355
Q2 2016 - 361
Q3 2016 - 373
Q4 2016 - 387

380 cSt Singapore Cargoes (US$ per tonne)

Q1 2016 - 146
Q2 2016 - 152
Q3 2016 - 168
Q4 2016 - 181

0.05% Singapore Gasoil (US$ per tonne)

Q1 2016 - 350
Q2 2016 - 365
Q3 2016 - 380
Q4 2016 - 399

3% US Gulf Waterborne (US$ per tonne)

Q1 2016 - 140
Q2 2016 - 149
Q3 2016 - 165
Q4 2016 - 178

N2 Heating Oil (US$ per tonne)

Q1 2016 - 346
Q2 2016 - 358
Q3 2016 - 376
Q4 2016 - 391