Three scenarios for world oil prices in 2012

Oil&Gas Materials 10 January 2012 09:47 (UTC +04:00)

Azerbaijan, Baku, Jan. 10 /Trend, A.Badalova/

Supply management, economic fragility, and resuming Libyan oil production will keep

Brent crude oil prices at $100-$120 per barrel range within 2012, major U.S. investment bank JP Morgan's analysts believe.

"Brent oil prices are likely to remain at $100-$120 per bbl for most of 2012, as producers are willing and able to offset limited demand or supply shocks of up to 1mbd while the global recovery finds firmer footing," analysts said in their report.

However, analysts assume other scenarios for oil prices in 2012.

They believe that great shocks would likely exhaust oil producers' ability to rebalance the market.

Oil prices will be highly sensitive to relatively small changes in expected and realized global economic activity, analysts believe.

According to analysts' main forecast, global real GDP will grow by 2.1 percent in 2012.

They predict Brent price to drop to $50-$70 per barrel if global growth falls to 1.0 percent or below, before reduced production stabilized prices.

The third scenario, which envisages a significant increase in oil prices, will be observed in case of a supply shock comparable in size to the lost of Libyan barrels during the Arab Spring (1.3 million barrels per day).

The reiteration of such a supply scenario could increase Brent price to $150-$190 per barrel, analysts believe. According to them, this would happen partly because oil consumers may hesitate to release emergency stocks in the face of a protracted disruption.

Last week oil prices fell amid the concerns about the European debt crisis. Brent February futures at LSE decreased by $0.24 to $112.5 per barrel. WTI February futures at NYMEX decreased by $0.53 to $101.31 per barrel.