See oil in a range for next 12-24 months; bet on gold: UBS

Brent crude is holding above USD 112 a barrel. In an interview to CNBC-TV18, Daniel Morgan, global commodity analyst, UBS Equities Research says oil price is going to be rangebound for the next 12 to 24 months.

He is more bullish on gold now. "We just upgraded our forecast for gold to peak over USD 1,900 an ounce," he adds.

Also read: Oil super-bull Goldman slashes price forecast

Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee.

Q: What have you made of the way crude has been moving? Do you see this kind of geo-political premium remaining or crude correcting substantially between now and the year end?

A: The price of crude oil, particularly the Brent, has seen an elevated price from political events in Iran, the broader Middle East, Syria and even election issues such as Venezuela. All of these are going into a political premium for crude oil. We are looking for prices to decrease from here. We have got tide oil coming out of United States as well as a little more production out of the North Sea. This should weigh a little on prices. I am not too bearish. It is still above USD 100 a barrel.

Q: For 2013, do you have some early forecasts?

A: Our forecast are a little bit weaken, USD 113 a barrel for Brent. We are expecting prices at about USD 105 a barrel. So, it is not too much of a decline. Oil price, in our view, is going to be rangebound for the next 12 to 24 months. Subdued economic growth, on the one hand, weighs on oil prices. But political instability in oil producing regions, on the other hand, may give that political premium.

Q: What about gold?

A: We have recently turned a little more bullish on gold. We just upgraded our forecast for gold to peak over USD 1,900 an ounce. The big driver behind that lift is quantitative easing from both United States and Europe. We have been surprised by the large scale and open ended nature of QE. This is to upgrade our forecast.

Coming back to the key issues behind gold, it is a hedge against inflation. That is what we are really looking for the price to perform. It is not a near-term phenomena with the global economy operating at a subdued trend.

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Q: How much of your call on commodities for next year is tied in with the way the dollar might move?

A: With commodities priced in US dollars, it is a key component behind our forecasting. But behind our forecast it is mostly fundamentals and particularly looking at key demand driver such as China, the biggest consumer of most global commodities.

We spend most of our time looking at fundamentals. The US dollar looks for US recovery. The numbers coming out of US, in the past few weeks, have been pretty positive. So, US recovery looks like it is starting to take shape. That would be bullish for United States dollar.

Q: How did you read the recent economic data coming out from China? What it means for the base metal market?

A: The GDP came out the other day, almost 7.5 percent GDP growth in the quarter. That looks pretty okay with us. China’s economy is taking long. It looks like it has got reasonably stable growth. That is what we think that Chinese governor would be happy with. So, they are looking for stable growth going forward. Judging by the numbers, we think they have got it. We are coming into Q4. The economy is going to be restocking ahead of their big production campaign in the first half of 2013.