Crude will stablise around USD 90 per barrel: Fat Prophets

In an interview with CNBC-TV18, David Lennox, Fat Prophets, speaks about crude and gives his outlook going forward.

He says, crude will stablise somewhere around the USD 90 per barrel region. Also read: Crude could touch $80/bbl, says Commodity Broking Below is a verbatim transcript of his interview with CNBC-TV18's Sonia Shenoy. Also watch the accompanying video. Q: What have you made of this huge sell-off that we are seeing in the crude market? A: What we are seeing in the market is a reaction to the gloomy economic outlook that is now starting to prevail upon financial market thinking. That thinking has basically come about because most of the geo-political events have now probably diminished or subsided a little bit. So, when the poor US employment figure came out last night in US time, the market decided that petrol was certainly not the place to be and started to cut their profits. Q: What are you estimating in terms of a further downside for crude? Is this just unwinding of leverage positions or do you think a protracted period of downside that crude is seeing? A: It is difficult at this point in time to probably pin point where the price will settle. I do believe that we have seen a major unwinding of speculative positions and a major unwinding of the geo-political risk premium that had been priced into oil over the last three-four months due to the event that have happened in the Middle East and Northern America. When you look at the potential outlook for oil and the potential for what is happening in the US, while the US is not, at this point in time, consuming a considerable amount of oil, certainly consumption is in terms of the gasoline usage has dropped considerably, we do believe that can place a lot of downward pressure on oil for the near-term. Q: Where do you hope to see stability, both in Brent and Nymex? A: We would be looking for stability somewhere around the USD 90 per barrel region. If you look at comment made by Saudi Arabia some months ago, that was the level where I would be comfortable with that the price of oil going forward. With all the geo-political strife out of the way and with the market now concerned with potential growth coming out of the US and they are the biggest consumers of petrol item, oil may just settle somewhere around the USD 90. At this point in time, however, it is a little difficult because we are seeing a lot of knee jerk reaction not in oil, but a number of other commodities as well.