Goldman Sachs projects Brent crude to average $120 per barrel next year and Barclays Capital estimates Brent to average $115 a barrel. According to a recent Reuters poll, analysts expect Brent to average $105 per barrel in 2012, reports Zaida Espana for Financial Post.
“We expect a mild recession across the OECD next year to put a damper on demand and consequently prices,” David Wech of BC Energy said in the Financial Post article. “Nevertheless, the risk to oil prices is definitely on the upside given a still troubled geopolitical environment.”
Glen Ward, head of retail derivatives at London Capital Group, also expects the upside risks on oil prices to outweigh the downside and that traders will feel more comfortable with long positions.
The International Energy Agency calculates that an E.U. embargo on Iranian crude could cut 600,000 barrels a day of imports, which would further tighten markets and inventories. Tensions between the West and Iran over the country’s nuclear program has also raised fears that the Strait of Hormuz, the world’s largest shipping channel for oil, may be closed.
The Reuters poll reveals that analysts expect the premium for Brent over U.S. crude will average $8.20 per barrel in 2012, down from the average $15.7 year-to-date in 2011. The spread is expected to further narrow as the U.S. Seaway pipeline reversal comes into effect and Libyan crude returns to market. [Oil ETFs: Tracking the WTI-Brent Spread]
U.S. Brent Oil Fund
For more information on the oil market, visit our oil category.
Max Chen contributed to this article.