Brent price to fall; see year avg of $117/bbl: FACTS Global

Praveen Kumar of FACTS Global Energy tells CNBC-TV18 that the price of Brent crude is expected to fall further from current levels because of the eurozone crisis and Saudi Arabia’s proactive efforts at trying to bring the price down.

“I think it is the whole EU debt crisis issue and what is happening with Greece that seems to have taken the upper hand here. There is also the Saudi Minister who has stepped in and said that USD 100 per barrel would be the right price,” he said. FACTS Global sees Brent average at USD 117 per barrel for this year, due to which Kumar says there could be further downsides from here. On the flip side, he says Brent could spike if talks fall with Iran, if the situation in Europe reverses and the troubles of euro zone go away. Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video. Q: How much more of a slippage do you see in Brent crude from here? A: The Brent has slipped about USD 4 per barrel. In fact for this month we have it averaging about USD 113 per barrel. Our internal forecasts are at about USD 117 per barrel for this month, so it has certainly slipped. I think it is the whole EU debt crisis issue and what is happening with Greece that seems to have taken the upper hand here. There is also the Saudi Minister who has stepped in and said that USD 100 per barrel would be the right price. So it seems like Saudi is starting to take a lot more proactive measures here in terms of bringing the price down and I think that is what is starting to play in. But you have to keep in mind that there is still a risk premium associated with the crude price. There were talks with International Atomic Energy Agency (IAEA) which didn’t work out for Iran; it somewhat wasn’t conclusive. There is also the talk with the Security Council that is up and coming. So those factors will come into play. I think from a supply/demand point of view, the crude prices should be going down from hereon. In fact for the whole year, we have Brent averaging about USD 117 per barrel. So crude price should go down, but depending on what comes out of the talks with the Iran, we may see it spiking again. Q: How high is the probability at this point that we may see double digits on Brent over the course of the next two months? A: If the market is as is and if these talks keep on going, we should see crude prices starting to slip downwards. The biggest producer of the crude in the world, Saudi, has stepped in and said that they would like to see the price coming down to USD 100 per barrel and that has definitely helped the sentiment. What is coming out of Europe is also definitely not helping the situation. You are looking at crude stock builds at highest levels all around the world; Japan is at a high, US is at a high, so from a supply/demand perspective definitely the market is priced much higher than what it should be. The spike could come if everything falls as far as the talks with Iran, the situation in Europe reverses and the troubles of euro zone go away. Right now, the way things are, we should see the Brent price starting to drop from hereon.