CGES: oil prices to fall below $100/bbl as result of weak demand

Oil&Gas Materials 12 January 2012 17:06 (UTC +04:00)

Azerbaijan, Baku, Jan. 12 /Trend A.Badalova/

World oil prices will fall over the course of 2012 amid the weak global demand, Centre for Global Energy Studies (CGES) predicts.

CGES maintains their pessimistic view of oil demand growth for 2012. CGES believes that as a result of a small year-on-year decline in the fourth quarter of 2011 oil prices will fall over the course of 2012.

According to Global Energy Studies forecasts, Brent price will fall below $100/bbl in the second quarter of 2012 and will continue to drop to $91/bbl in the fourth quarter of 2012 and average $96/bbl for the year as a whole.

According to CGES Oil Product Price Report, the low price scenario assumes that weaker global economic growth undermines further CGES's base-case incremental oil demand in 2012, reducing it to just 300,000 bpd (0.3 percent).

"By maintaining the non-OPEC output profile from the Reference case, the volume of OPEC oil needed to keep prices constant falls to a mere 28.6 mbpd, 1.4 mbpd below OPEC's agreed output level and almost 2.3 mbpd below current production," the report said.

In that case Brent price will fall to $56/bbl by the fourth quarter of 2012 averaging $76/bbl for the year, assuming no OPEC intervention, CGES predicts.

CGES's High Price case assumes the weak non-OPEC production in 2012, which will increase only by 400,000 bpd compared to 800,000 bpd predicted in the Reference scenario.

With OPEC production held constant, Brent will amount to $107/bbl in the second quarter of 2012, and will set a new annual record of just over $112/bbl for 2012 as a whole.