Deshpande says with an Opec cut, he expects market to be balanced as early as the end of the first quarter of 2017

Abhishek Deshpande: Bullish trajectory for crude oil in 2017

Business Standard

This rally, if sustained, will push back any permanent structural change in the oil markets

Cautious on rally continuing

Abhishek Deshpande, Chief Oil Analyst, Natixis commodities research

On February 15 in Doha, there was an agreement between the Organization of the Petroleum Exporting Countries (Opec) producers Saudi Arabia, Qatar and Venezuela and non-Opec producer Russia to freeze crude oil output at levels seen before January 11, 2016. These talks were followed by meetings between Iraq, Iran, Venezuela and Qatar day to discuss a collective production freeze. Just after the talks, Iran said it agreed in principle to help balance the oil market, but did not sign up to the proposal. Any production freeze based on pre-January 11 numbers was tantamount to Iran in particular not being able to bring an additional supply after the sanctions on it were lifted unless countries such as Saudi Arabia agree to production cuts, definitely not the case in the Doha talks.Cracks clearly appeared in the days following the Doha talks. On February 23, Saudi Arabia's oil minister Al Naimi suggested the country would not cut production. He also said Saudi Arabia would continue to invest t

Crude oil Outlook: Prices could fall further

Abhishek Deshpande

We have kept our forecast unchanged from September. We expect Brent to average $46/barrel in the fourth quarter of 2015 and around $48.5/barrel in 2016

Crude oil prices to remain suppressed till end-2016

Global demand for crude oil has risen rapidly, as the 50 per cent drop in prices starts to transfer some of the benefit to consumers via lower oil product prices. Global demand is expected to rise 1.5 million barrels/day (b/d) on average in 2015. Fundamentally, oil consumption has recovered across most of the demand engines of the global economy. We expect the total OECD (Organisation for Economic Co-operation and Development) demand to increase around 700,000 b/d. In non-OECD, Indian demand has been very strong this year, up five per cent in the first half. We expect total 2015 oil products' demand to grow 150,000 b/d. Chinese apparent demand has also risen close to five per cent in the first seven months of the year. However, concerns remain over its growth in the near term, with the recent drop in Chinese stock markets, weakening of the yuan and continued slowdown in Chinese electricity consumption painting a bleak picture for the world's largest oil importer. We expect Chinese dema

Brent could drop below $40 by early next year

Oil demand has been revised downwards by International Energy Agency (IEA) for 2014 by 200,000 barrels a day (b/d) as downward revisions were made mainly to the OECD, Europe and the Asia-Pacific. For seasonal reasons, 2014'Q4 is usually the strongest demand quarter in the year. An additional 500,000 b/d in demand on a  sequential basis is expected in the last three months. Hence, reducing the difference between total call-on-Opec (Organization of the Petroleum Exporting Countries) and what Opec is currently producing. Unplanned outages in Opec members and any small cut-backs from Saudi Arabia could help to balance the market over the remainder of 2014.As refineries return from their seasonal maintenance, we would expect demand for crude oil to improve, and further support could come from colder than expected winter weather.  We continue to believe  the complete removal of risk premia from oil prices has made markets very complacent relative to the geopolitical risks still emanating fro

Crude oil outlook: Floor not too far from current levels

Geopolitical risks will continue to play an important role in determining global oil prices

Crude oil outlook: Brent prices to average $108 in 2014

Over the past week, Brent  crude prices have increased by close to $5 a barrel ($2.5 a barrel for WTI), introducing a clear Iraq risk premium. The one-year high in oil prices was triggered by the sudden eruption of an Al Qaeda-linked militant insurgency in northern Iraq last week, raising fears of supply shortages and a civil war that might also draw in oil-rich neighbours. Iraq is the second largest producer of crude oil in the Organization of The Petroleum Exporting Countries (Opec).The successs in northern Iraq of the Islamic State in Iraq and al-Sham (ISIS) clearly demonstrates the extent to which the country is at risk of fracturing along religious and ethnic fault lines. ISIS poses a threat not only to Iraq's stability but also to Iraq's oil supplies and energy infrastructure. The refinery at Baiji, near Mosul, is now under ISIS control. With a capacity of 310,000 barrels a day, it is the country's biggest. It supplies oil products to Baghdad and most of the northern provinces. B

Crude oil outlook: Crude oil prices can rise above $120 if Iraq crisis escalates

2013 was expected to be a year in which non-Opec (Organisation of the Petroleum Exporting Countries) supply expanded more rapidly than global demand, putting additional pressure upon Opec producers to cut back output. With Opec operating a "collective" 30 million barrels a day quota, this was expected to put significant pressure upon Saudi Arabia and the other Gulf Cooperation Council (GCC) countries within Opec to reduce output.Non-Opec supply has indeed increased rapidly, led by sharply higher North American output. Even with the weakness of Brazilian and North Sea output, the increase in non-Opec production is close to 800,000 barrels a day. On the demand side, global oil consumption has risen only modestly, with strength in US and Chinese demand partially offset by weakness in Japan, India and Europe (in the first half of the year at least), leaving overall global demand rising by somewhere between 500,000-600,000 barrels a day.This picture implies a drop in the daily call on Opec

Brent likely at $106-109 a barrel

Though US crude oil production was up 19.5 per cent year-on-year from January-June this year and Canadian oil output rose 10 per cent year-on-year in January-March, recent increases in refinery processing rates and flow of crude oil out of the Midwest via pipelines and rail have provided support for prices.Outside the US, output is also subject to disruption. North Sea output has been down 10 per cent year-on-year so far this year and Russia is exporting far less oil to Europe, even though output in Russia has risen this year. Variations in oil output from the Organisation of Petroleum Exporting Countries (OPEC) including Nigeria, Angola, Libya and Iraq, have led to fluctuations in OPEC output in the region of 535,000 barrels a day. Further outages in supply over the coming months are likely, due to persistent uncertainty in African regions and as fields in the North Sea go offline for maintenance. So far, August BFOE loadings are two per cent below last year's level at 774,194 barrels

Supply continues to dominate prices

However, overall demand growth in the second quarter might be dampened by the Cyprus crisis and the indications that Asian economies are not growing that fast