Brent will remain above move above $110/bbl: Argus Media

Azlin Ahmad of Argus Media believes superstorm Hurricane Sandy is likely to put a cap on the crude oil prices. She said it would likely result in the refineries being shut or reduction in operations.

Brent December crude dipped 11 cents to settle at USD 109.44 a barrel, having reached USD 110.26. Brent was on pace to post a more than 2 percent loss for the month, a second straight monthly loss. "It can go slightly above USD 110 if there is no substantial damage to refineries in the US," Ahmad told CNBC-TV18 in an interview. Below is an edited transcript of the interview on CNBC-TV18. Q: We have seen Hurricane Sandy come through and it has resulted in shutting down some refineries in that area. But despite that crude continues to hover around USD 109 mark on the Brent. What is the impact that you see on Hurricane Sandy on the outlook for crude in the near-term? A: I think that right now it is going to put a cap on the crude oil prices. It could be because of the refineries are being shut or reduction in operations which will reduce the demand for crude oil for feed stock. I think we will have to wait and see what happens later this week after things settle down. And if the refineries have any substantial damage that could determine the direction of oil prices. But for now in the very short-term, I think it is going to be capped. It could be because of the lower demand or because of the storm the consumption of oil is going to be reduced. People will not be out on the streets, so general consumption will be a lot lower. Also read: Oil falls below $109 as hurricane shuts refineries Q: What kind of a range would you give both varieties of crude until the next eight weeks? Do you think rates would remain capped for NYMEX at south of USD 90? Do you think USD 110 would be a cap for Brent? A: I think that the Brent prices can stabilize. It can go slightly above USD 110 if there is no substantial damage to refineries in the US. Right now there has been slight delay in the start-up of the Buzzard field in the North Sea and also a reduction in the Nigerian crude exports because of flooding in some of the fields. So that will probably still keep Brent prices supported. I think it will still remain slightly above USD 110 also because the outlook for the US economy seems to be quite stable. Economic data that came out last week was quite positive. That will probably prevent oil prices from crashing sharply, if one is looking into the next several weeks. Q: You indicated that right now the demand and supply situation gets matched because of the Hurricane Sandy -that consumption has also reduced in a similar proportion. If it continues to disrupt operations for the next few days do you think that will result in any kind of a change in estimate for Brent crude prices? A: I think that the prices are going to probably fall rather than rise. After things settle down I think the kneejerk reaction is that crude prices will recover, until we get a better estimate of how the impact on the refineries are and how much is the reduction in consumption for the oil products. Right now there is still this balance. There will be reduced supplies of gasoline and distillates. At the same time there should also be reduced demand because it has shut down rail, shipping and roads. So I think that the market will have to see how the reduced supply counters the reduced demand. So I think we are going to tread water in terms of WTI and Brent at least for the next few days.