Oil market ready for a bullish move despite recent worries


The recent developments around the crisis situation in Cyprus caused new uncertainties to commodity markets. Crude oil market was no exception. Additional worries were being brought by China’s high-profile billion-dollar solar implosion. In a consequence, many investors and analyst foresaw another crash in oil prices. Yet, nothing really happened as it was just a speculation.

Every new geopolitical issue incites fear that something big is about to happen. The truth is that nothing will damage crude oil prices. There is a really good reason for that.

The oil price forecasts are actually rising. Along with them, petrochemical products prices are also expected to move up.

Certainly, there was a crude futures decline in the first phase of the Cypriot crisis. The brief negative comments on Chinese industrial prospects also added to the swing down. Yet last Friday morning, the crude futures market began to move back up as oil price strengthened once again.

In addition, Societe Generale raised its 2013 Brent crude price outlook recently. The bank still sees the oil’s fundamental outlook balanced and constructive to bullish. The forecast was revised as Brent price projections for 2013 were raised from $110 to $112 per barrel.

SocGen believes that the aggressive Saudi output cuts have increased to offset US supply growth. Also, recent data raised the level of confidence in healthy China-based demand rise.

The bank also upgraded its outlook for 2013 average natural gas prices. Now projections expect $3.70 per million metric British thermal units from $3.52 mmBtu. The raise was on the back of tighter-than-expected supply/demand balances for the spring.

Bearish perceptions are mostly driven by demand expectations. This is something that analysts regularly do with oil demand. Most of the initial reactions witnessed in the market are overdone every time a negative factor appears.

Also, all the negative reactions come without any data support. Solid figures supporting a reduction in futures contract prices need at least three months to appear. In addition they actually provide an indication of a decline in demand. And even if such figures appear, their impact is temporary and conditional. Therefore, there is nothing to worry about, because the crude market is still safe and sound and ready for a rebound.


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