Poll: Oil to stay above $100/bbl despite slowdown

Brent crude oil prices are forecast to stay well above USD 100 per barrel despite widespread expectations of an economic slowdown, a Reuters poll said on Tuesday.

A Reuters poll of 35 analysts showed Brent crude averaging USD 106.80 per barrel next year and USD 108.60 in 2013 as demand for fuel from China and emerging economies keeps the global oil market tight. US light crude oil, also known as West Texas Intermediate or WTI, is forecast to average USD 92.00 a barrel in 2012 and USD 99.50 in 2013. Forecasts are broadly unchanged from last month's Reuters poll as investors balance their risk strategy between strong physical markets that have given nearby oil a big premium over forward prices and a bearish economic outlook. "High level of uncertainty is causing oil market participants to trade on the current bullish physical situation rather than an uncertain or bearish forward-looking outlook," said Societe Generale analyst Michael Wittner. Since the publication of the last Reuters monthly oil poll on Sept. 28, Brent futures have risen by around 7% to above USD 111 a barrel. In that time, the average forecast for Brent next year has not changed and the projection for 2013 has dropped from USD 110.40. The average forecast for WTI next year has dropped by just 60 cents. Several high-profile analysts have trimmed their forecasts, including Goldman Sachs, known by some of their competitors as a 'perma-bull' for its relatively high forecasts. Goldman has cut its price expectations on concerns the European financial crisis will restrain economic growth and curb global fuel demand. Goldman has reduced its Brent price outlook for next year to USD 120 from USD 130, saying the market continues to focus on the risk of a new economic recession. The euro zone debt crisis worries analysts and some argue optimism over a possible successful resolution is overdone, and may herald a price correction. "While the physical market remains tight, providing support to prompt prices, the demand outlook remains bleak," Credit Agricole global oil analyst Christophe Barret said. The downgrade by Goldman Sachs has left Canada's CIBC with the highest forecast in the Reuters poll at USD 127 a barrel for next year, followed by ANZ at USD 123 a barrel. Despite the worries about the economy, 27 of the 35 analysts polled by Reuters expect Brent to be over USD 100 a barrel next year. Barclays, which sees Brent at USD 115 next year, says tension between the physical and macro-related views of oil has grown. "With low spare capacity, falling inventories, a high degree of geopolitical risk, and an existing large supply deficit, in our view, it is only the fear of macroeconomic discontinuities that is keeping a lid on oil prices," Barclays analysts Paul Horsnell and Amrita Sen wrote in a note. "Without the presence of that fear, we believe that Brent would have already reached an all-time high and climbed past USD 150 per barrel in an attempt to ease tightness by rationing the demand side of the market." Recent market enthusiasm about a potential solution to the euro zone's debt problems could be deflated quickly if this week's summit of European leaders fails. "Optimism on Europe and overall risk appetite has wavered in the past week, but has been resilient and remains high," Wittner said. "As a result, we think the results of the European and G20 summits may disappoint the markets, and result in downward price pressure."