Brent crude stays between 90 and 125 dollars in 2013

Technical analysis for crude oil -14 June 2013

Bank «Saxo» believed constantly price range Current trading for Brent crude over the next year as it is now; especially with the hindsight of several factors have the same degree of importance, will combined to keep the price confined in a price range between $ 90 and $ 125 barrel.

The bank stressed that despite the passage of time periods tainted by suspicion, the Brent Crude Oil trading was confined within a relatively stable trading range over the past two years, and especially in comparison with previous years that have emerged during periods of tremendous highs and lows in prices.

The first Hansen, head of strategy goods in Saxo Bank: During the past two years the price of Brent crude benchmark global approach to know the prices majority deals actual physical on oil, and Pat also – increasingly – my watch in the world of crude oil bonds investment. We’ve seen finally time ago near two of the indicators the world’s most up – all of Standard & Poor’s and Goldman Sachs Commodities – Announce a further increase in the weight of a point percentage of Brent oil in their bonds trade for 2013 at the expense of West Texas Intermediate crude, which is still enjoyed by weight heavier but it fell sharply from its level in the past years.

Large oscillations

He added: caused fluctuations in the price of Brent crude for the period 2010-2011 in the first place for fear of large and small on the interruption of supplies, especially the civil war in Libya early 2011 and the announcement of the imposition of sanctions on Iran over suspicions about its nuclear intentions in early 2012. Led minor interruptions in production in Sudan, Nigeria, Syria and the North Sea also to support oil prices.

In exchange for these concerns about the interruption of supplies, the global economy has continued to boom according to the pattern of relatively slow, resulting in a slight increase in global oil demand. And helped concerns recession – achieved now in Europe – in some other regions of the world sometimes to balance the concerns of supply above and compensated, resulting in minor fixes regarding relegation year in the prices of the securities markets during the session of trading with little major reforms in this area.

Average prices

He explained that the average price of Brent crude remained almost unchanged over the past two years, ie at the level of 110.75 dollars per barrel in 2011 and at 111.70 dollars per barrel in the year 2012 at least until this time. And is located about 9% of the total volume during the past two years, between 110 and 111 dollars a barrel, while located 54% of the volume traded within $ 9 between 106 and 115 dollars a barrel.

Hansen said: The party general decline curve in stock market prices during the trading session lower – see also below – the longest in some way by the general rise. This explains – among other things – the existence of speculative investors such as hedge funds and speculative traders.

Vtjar speculative interact with the movement of the market, either through an increase or reduction of exposure, during the two big Zayadtan in oil prices – as we can see in the chart above – may Otbata small wave of selling at low prices and other large, because they have been forced to reduce procurement cases causing loss. During this time of long-term self-liquidation find more often than not that the movement extends far beyond which guaranteed the basics priority.

He added: After we have identified the prime movers  of high oil prices – the geopolitical concerns and investment flows resulting from speculation – let’s take a look at some of the other reasons that make us believe that oil prices will remain within the range that range in the foreseeable future.

Saudi production

He continued: During early 2012, when the price of Brent crude rose heard often verbally intervention of the Minister of Petroleum and Mineral Resources, Saudi, Ali Naimi aims to achieve a reduction in prices. Since Saudi Arabia is one of the largest oil producers in the world and the only one that has spare capacity to increase production, the world is paying attention and recorded his observations when he speaks Naimi.

After the ban on Iranian oil Saudi Arabia increased its production to reach nearly 10 million barrels per day in order to fulfill his promise to restore oil prices to $ 100 a barrel, a level acceptable for both the producer and the consumer. As the global economy continues in the case of a fragile recovery, oil prices play a deterrent role of growth and thus also demand deterrent.

Release of reserves

Hansen said: raise prices due to geopolitical tensions also carries the risk of entry of the Organization for Economic Cooperation and Development to calm markets by releasing oil products from its strategic reserves. The members of the International Energy Agency are committed to keep on emergency oil reserves would cover 90 days of imports, while the United States, the largest consumer.

Currently has approximately 700 million barrels reserves, according to the U.S. Department of Energy. Despite the release of strategic reserves which was implemented in June 2011 – due to loss of Libyan production – has had a limited impact on the long term, the threat of release longer enough to deter investors who rely speculative trades and prevent them from interfering significantly, and thus prevent prices from rising .

U.S. oil production

He continued: non-OPEC countries, we find that the most significant growth in production in 2013 came from oil shale in the United States. This growth has led already to a significant decline in net imports of crude oil over the past five years.

The U.S. Energy Information Administration in its forecast annual related to the field of energy for 2013 that “a sustained improvement in the field of advanced technologies for the production of crude oil continues to supplement domestic supplies expected” and see through the expectations that up production to 7.5 million barrels per day by the year 2019.

This paradigm shift in global oil markets over the next decade could eventually – according to the International Energy Agency – to make U.S. production of oil exceeds production of Saudi Arabia. This increase would help to increase the insulation and the gap between demand and available supply, which reduces the risk of higher prices during periods of shortage or supply disruption.

Equation budgets

He continued: The oil revenues are the main source of income in most of the Gulf countries. Parity costs with revenues needed to balance their budgets has increased a lot during this period, and is expected to rise further in 2013. It is estimated to take Saudi Arabia price point equivalent costs with revenues equal to about $ 80 a barrel, while the equivalent point costs with revenues in other countries such as Nigeria and Russia – from outside OPEC members – closer to $ 100 a barrel.

Average price reached about $ 111

Said first Hansen, head of commodity strategy at Saxo Bank: We believe that the price of Brent crude staying within a price range between $ 90 and $ 125 in 2013 with an average price of about $ 111. While continuing global oil prices in the exposure to sharp movements and sudden – often to the upside – and due to supply disruptions, the recent changes – especially in the methods of production of new – should leave the market in better condition and less volatile than it was in previous years.

While not dispel concerns about the increase in oil prices after, they at least have postponed a number of years. This will make the world earns some time that might benefit him to continue to improve production methods through new technology. This will increase the demand for natural gas – note that the world has plenty of natural gas.