Commodity Blog

Commodity news, technical and fundamental analysis, market data on precious metals, energies, industrial metals, and soft commodities


Forecast: Crude Oil in 2014

January 9, 2014 at 21:06 by Vladimir Vyun

Crude oil was demonstrating a nice rally in 2013 up until September, but was falling since then. Oil bounced in December, but fell sharply at the start of this year. Will this year prove to be more positive for the commodity or will the decline continue? Let us look at forecasts provided by various analysts.

Chris Nelder proved to be a rare optimist, promising prices to rise in 2014. He argues that global consumption will be steadily increasing as world economies continue to recover, while growth of supply will not be able to catch up the increasing demand. As a result, Nelder said:

I am breaking with the crowd and forecasting higher, not lower, oil prices. In 2014, I expect Brent prices to average $112/bbl. For WTI, my target is $103.

Indeed, the majority of analysts do not believe that the price drop will stop this year. The US Energy Information Administration is among them. The EIA estimated that output from the Organization of the Petroleum Exporting Countries will decline by 0.5 million barrels per day, but non-OPEC production should demonstrate record growth by 1.9 million bbl/d in 2014. Demand from countries outside of the Organization for Economic Cooperation and Development will increase by 1.3 million bbl/d, while OECD consumption is expected to fall by roughly 0.1 million bbl/d. As a result of such projections, the agency estimated:

EIA expects the Brent crude oil price to weaken as non-OPEC supply growth exceeds growth in world consumption. The Brent crude oil price is projected to average $105/bbl and $102/bbl in 2014 and 2015, respectively.

As for West Texas Intermediate crude:

EIA expects that WTI crude oil prices will average $93/bbl in 2014 and $90/bbl during 2015.

Oil & Gas Journal agrees with such predictions. OGJ estimated that global supply will be at 93.0 million barrels per day, while demand will average 92.1 million bbl/d. OGJ concluded:

As world consumption growth is outpaced by non-OPEC supply growth, the Brent oil price will continue to decline in 2014.

Trading NRG took something like a middle ground. In short term, the outlook look bullish for crude:

In the past several weeks, the supply has fallen below refinery inputs; this development suggests the oil market has tightened. If this trend persists, this could further push up the price of oil in the coming weeks.

Yet the longer term projection is much worse:

Looking toward 2014, however, the current expectations are that the oil market will loosen, which is likely to bring oil prices down to the low $90.

As one can easily see, the general consensus is that oil prices will fall in 2014. Of course, any major event may change the trend. Also, prices tend not to move in a straight line, therefore price fluctuations should provided trading opportunities for an enterprising trader.

If you have any questions and comments on crude oil today, use the form below to reply.

Leave a Reply