Expect support for crude at $80-81 per barrel: Barratt

The outcome of the Federal Open Market Committee (FOMC) meeting on Wednesday and whether operation twist will be extended or not will provide stimulus for crude prices, Jonathan Barratt of BarrattsBulletin.com tells CNBC-TV18.

If the FOMC meet throws up something positive, it could lead to West Texas Intermediate (WTI) prices testing back to USD 85-87 per barrel in the near future, believes Barratt. He further added, "I think that USD 80-81 per barrel and USD 93-95 per barrel on the Brent price, is where we are seeing major support. On the WTI, we are seeing that psychological support at the USD 80 per barrel."
However, Barratt advises investors to look at a range of USD 82 per barrel and USD 83 per barrel, if they are looking to go long or wish to hedge. On the WTI, he is looking for USD 85-87 per barrel. Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video Q: Are we going to see more downsides because of both these issues, Iran coming on to the negotiation table, would that remove more of risk premium, what is the range we are looking at?
A: I think that you are seeing a middle eastern premium erode just because you have had Obama, Putin saying that we are going to solve this issue peacefully. I think as a result of that markets said okay, we can now take off that risk premium we have had in the market before. It is interesting because both Putin and Obama do not want to see oil prices high.
In effect, it is the only real solution. They have to contain the price. I think everyone wants the price of crude to be lower because that will help to stimulate the economies around the world. So if anything there, I think he is saying that middle eastern premium starts to erode because everyone says look, we have got to solve this some other way, we cannot be nasty, we know we are starting soon, but let us try and solve the issue.
I think that is why we are seeing prices a little bit under pressure. We also we have some concerns in Spain which is seeing prices under pressure. Q: Assuming there is collective action from central banks worldwide with regards to the eurozone and maybe the FOMC meet is positive with regards to some sort of monetary easing coming out from them, give us a sense in terms of what are the upside risks we could then see on crude?
A: I think it stems from where the Organization of the Petroleum Exporting Countries (OPEC) has placed the flow. OPEC about eight months ago said that West Texas Intermediate (WTI) closed around USD 80 per barrel. They are comfortable with it. If it starts to fall through that area, then you will see some more on the quieter side of the argument. 
But I do think that whilst we are going to get some more intervention, some more spend and stimulus occurring, I am going to look towards the FOMC meeting this week to see whether we are now going to get an extension of operation twist. If we do get an extension there, then that is going to cradle with more stimulus which I think will support prices.
In the short-term for crude, I think there is more stimulus going on to the table at the moment, which should increase the demand for the commodity. As a result of that I think we are getting close to a low for the price and I would not be very surprised to see WTI test back to USD 85-87 per barrel in the not too distant future. Q: Where is it supported, does USD 80 per barrel get taken?
A: I think that USD 80-81 per barrel and USD 93-95 per barrel on the Brent price, is where we are seeing major support. On the WTI, we are seeing that psychological support at the USD 80 per barrel.
I think the market is quite comfortable for it to try close to that level. But we are advising our clients at the moment that if you do wish to hedge or you are looking to go long, then anywhere between USD 82 per barrel and about USD 83 per barrel is the right place. We are currently long at the moment, looking for that USD 85-87 per barrel on the WTI. Q: Give us a sense with regards to gold. How exactly do you see gold prices move, it is currently above USD 1,600 per ounce, how would you approach it now?
A: I am quite happy today about this level. USD 1,635 per ounce, USD 1,630 per ounce. The good thing is that as we led into the Greek election, we had this premium going on the table to gold and it has done very well to hold these levels. Now also ETFs have increased by about 16.1 tonne, over the last week.
That gives me a sense that the market is still nervous out there and people want to buy the metal. A break, USD 1,635 per ounce on the top side, I think will see the start of a good trend higher. If anything is there, we are bullish. We are currently long and I really want to wear it if it gets through that USD 1,635 per ounce again.