Crude may be back at $100-110/bbl by yr-end: Rabobank Int'l

Jan Lambregts, Director & Head-Research (Asia),  Rabobank International is concerned about the financial conditions in the US, the weak data from the US and macro-data from around the world. He thinks that by the end of this year, one could well be seeing crude oil prices back to the USD 100-110 per barrel mark, which is quite a correction from the levels of today. It will have quite an impact on inflation figures as well, he feels.

Excerpts from CNBC-TV18’s exclusive with Jan Lambregts:

Q: We are getting a mixed picture if you only look at yesterday’s data from the US financial markets. We are getting JPMorgan that is surprising in its numbers - slightly positive - and you have got a Merrill Lynch that deeply disappointed the markets. What are you looking at in terms of the US financial cues? Do you think that we are yet going to see some kind of an implosion?

A: Looking at the situation out there right now, a couple of things have concerned me. Of course we had a few better than expected figures this week - Wells Fargo and of JPMorgan Chase as well. But they may not be most indicative of the financial crisis that is playing out. Merrill’s numbers are maybe more indicative.

So, that is something to be concerned of. The financial crisis obviously hasn’t gone away like many hoped a number of weeks ago and a couple of months ago. People started talking about the worst being behind us. Now a lot of people are having to face up to the prospects of the second half this year, which may see more incidents that shakes up the markets.

On top of that in the next couple of months we may get further weak data from the US. Again a couple of weeks ago people thought that recession may already be over. But now it looks like it will stretch into the third quarter. There will be no tax refunds supporting the markets.

The third factor that really worries me right now is that it has seemed to turn more into a global slowdown and particularly in the Euro-zone - the macro-data has been disappointing and also in Asia the first signs are showing up. This may be turning into a global slowdown.

Q: What is the call then on inflation if there are such distinct signs of slowdown and in the last 48 hours the turns in the crude market? Are you getting a sense at all that global inflation is peaking?

A: If we are talking about a global slowdown, this would have to be accompanied by disinflationary forces. The big surprise of the recession in the US has been the crude oil prices and other commodity prices have just continued to run up. That, in itself is probably not sustainable going forward. We have now seen a couple of days of correction in crude oil. It may still be early days to call with a peak having already been behind us. But it would very much fit the picture of the next six months, to see this correction continue.

In the broader commodity markets, base metals, oil and energy in general there is a lot of scope on the downside here. It just doesn’t gel with a global slowdown to have these heightened figures.