WTI to trade at $90/bbl; Brent at $98/bbl: Jonathan Barratt

The focus is slowly moving to other asset classes, especially commodities. Brent crude and Nymex crude saw sharp falls of about USD 90/bbl and USD 80/bbl respectively but are slowly inching higher.

In an interview to CNBC-TV18, Jonathan Barratt, CEO, barrattsbulletin.com says he sees crude edging higher from current levels. “I expect WTI to trade around USD 90/bbl and Brent crude to remain around USD 98/bbl.” Below is an edited transcript of his interview. Watch the accompanying video for more. Q: Are you expecting a further inch higher on the crude market or do you think the economic conditions don’t warrant an immediate spike in the near term?
A: You will find that crude oil prices will start to edge higher. The markets taken what is out there - economically the concern is obviously in Europe, the economics, the parts of the slowdown which we are witnessing in Europe but I think they are taking heart on a few fronts. Obviously, durable goods orders last night were quite a positive.
Also we have seen some concerns on the seasonal front in the States. When I look at that it suggests there is more of a positive picture for crude and I probably think that we have got an intermediate low in place. Q: What would be the average that crude clocked for the quarter ending June 30? In your estimate, what might be the average for Brent in the next July-September quarter?
A: I think they are certainly going to be higher. You are looking at about the USD 88 a barrel to about USD 92 a barrel for WTI. For Brent I am probably looking little bit higher than that probably up around that USD 98 a barrel as an average. When I look at my analysis, I am a little more positive than a lot more people because I can actually start to feel that the economies are now starting to pick up. We are starting to get some momentum.
Naturally there are concerns in Europe as we know and we are going to wait for the EU summit to see if we get any positive news coming from that. I actually think we might see something positive come from it. So that will underpin and underwrite some of this movement in crude that I am expecting over the next quarter. Q: If you are expecting average of USD 98 a barrel you are largely expecting it to be stable. You are not expecting it to go back to that USD 120 a barrel levels at least in the next couple of quarters.
A: Not in the next couple of quarters. I still think there is a long way to go in terms of economic demand. We have still got issues in China as well. I don’t see an aggressive move unless of course we get some geo-political issues starting to develop. When we look at Syria, Turkey, Iran, we got the trade or oil embargoes commencing. If we do get some geo-political issues different story.
But given that we have still got to try and edge higher and given that we do see some light at the end of the tunnel, I actually think people will be more encouraged by this. The global economies need crude to be lower in order to help stimulate demand by themselves. So not aggressive but I will certainly say there is a little bit more tightness in terms of demand slowly developing. Q: Would you say the same arguments go for most of the LME metals as well that the worst is in the price and now they start getting support because of some rumblings of good data?
A: I hope those rumblings continue. When I look at some of those metals, particularly, copper I am not as convinced. I don’t actually see that the positiveness is starting to emerge into more demand. We do know we have got some tightness in supply in copper that is something we are already aware of. But when I look at the base metals, I can actually get a sense that they are still relatively subdued in terms of the price action.
I will take more lead out of China to see whether or not that economy can start to pick-up. We have got some very important PMI data coming out on Saturday and that should help in our analysis to see whether China, the number one consumer, is actually pulling out of this slowdown and starting to move ahead. China will be the key for that market. Q: The USD 1,520 level on international gold is being touted as an important one. Do you see gold breaking below that? What are the drivers at the moment?
A: At the moment, everyone is focused on gold at those levels. They are technically very important. USD 1,520-1,535 I think is the key. I feel there is a lot of support for the metal on any dip and it is tested a few times but always seems to bounce back. I’d be inclined to think that nothing huge will happen to gold for sometime until perhaps that USD 1,530-1,550 area is broken.
I think that it has more to do on the supply side and the fact that we will get an increase in demand particularly as we head onto the festival seasons in India, more consumption out of China. I do like the structure of gold. technically as well. So I would like to say it lifts but USD 1,530 to me is a very key important area that we all should keep an eye on.