Crude may touch $150/bbl: StanChart Bk

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS Crude surges to a record high of $135/bbl Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Avinash Raheja , Dir - Commodities of Standard Chartered Bank said the supply issues of crude continue to dog the market and it's too difficult to say if it's going to go up in a hurry after the way it has gone up. He added that in the medium-term and long-term, the supply remains tight for the market and the USD 150/bbl risk still remains in crude oil in this year.

 

Raheja believes that supply is not what the market needs and neither is the quality of crude what the market wants. He believes that the weakening of the dollar is pretty supportive for crude oil prices.

 

Excerpts from CNBC-TV18's exclusive interview with Avinash Raheja:

 

Q: Where is crude headed? Will USD 135 at least be the point where you could see some level of longish consolidation or will it be in a hurry like it has been from USD 110 onwards?

 

A: The supply issues continue to dog the market and it's too difficult to say if it's going to go up in a hurry after the way it has gone up. We definitely expect some weak data coming out from the US in the coming weeks and that should hopefully help soften crude oil prices. Overall in the medium-term and long-term, the supply remains tight for the market and the USD 150/bbl risk still remains in crude oil in this year.

 

Q: What are you looking at in terms of timeframe for USD 150/bbl, which is now practically on everyone's lips? In fact, I know this is tough, but what are you looking at in terms of a price level for a one month period, a one quarter and the rest of 2008?

 

A: For us it's basically the rest of 2008 where we are talking about USD 150/bbl as the upside risk. 

 

Q: The energy watchdog International Energy Agency (IEA) just came out with a report today suggesting that supplies may face a certain bit of concern. Have you seen any major change in the macros?

 

A: On the supply side, Saudi has increased the output by 300,000 barrel. While this does look a little encouraging there are two things one needs to look at. Firstly, supply is not what the market needs neither is the quality of crude. Secondly, there has been some cut down in supply from other countries like Nigeria, which is kind of offsetting.

 

Supply still remains a major issue for crude oil and on the demand side. Even though we are going through some kind of softening on global economy, whether it's the US, maybe even some of the Asian economies, we are still seeing an increase in demand on a year on year basis for crude oil.

 

Q: Is it a dramatic move on the part of the US Congress to sue the Organization of Petroleum Exporting Countries (OPEC) creating a ripple in the market? Do you think that this might eventually lead to some kind of an arm-twisting, at least ahead of the US elections that might lead to a peaking off or perhaps even a bursting of this bubble? Are you expecting something like bubble burst in crude at all?

 

A: Just because prices are high, I don't think we could call this a bubble though we could have some good strong corrections. Generally bull markets are associated with correction. One must acknowledge that the fundamentals are strongly still in place and it's not that the fundamentals have deteriorated over the last couple of years or even the last couple of months for crude oil. The weakening of the dollar, is pretty supportive for crude oil prices. So as long as there are  no major setbacks on the demand side for crude oil, it is unlikely that we are going to see any significant fall in the prices of crude oil unless there are just going to be corrections.

 

Q: The news of the US suing is not creating a ripple. It's not bothering anyone?

 

A: So far the markets don't seem to be suggesting that.