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27 Mar 2015
Expect significant oil price growth towards 2015-end – KBC
FXStreet (Barcelona) - The KBC Bank Research Team comments on the key probable reasons behind disruption in oil prices due to the Yemen conflict, and further shares the outlook for oil price.
Key Quotes
“The price of Brent soared and hit a two-week high yesterday on news that Saudi-led coalition started air-strikes in neighbouring Yemen.”
“Regarding geopolitical risks, the talks between Iran and the world powers about its nuclear programme present larger risk for the oil price, in our view. If the agreement was reached and the Western sanctions were lifted, the country could increase its oil exports by 1 mbpd. This poses a clear downside risk for oil prices (especially in a situation of already oversupplied market).”
“Even though Yemen itself is a rather small producer of oil - in 2014, its average production reached 0.13 million barrels per day (bpd) – the news triggered a relatively large market response.”
“The key reason probably is that market worries about a possible disruption of oil flow through the narrow Bab el-Mandeb (about 3.8 mbpd), which is, however, not likely given the pledge of the head of the US forces in the region to keep the route open.”
“We therefore maintain our view that the oil price could decline in weeks and months to come and expect more significant price growth towards the end of this year. The balance of risks is, however, skewed in the direction of longer period of low oil prices.”
Key Quotes
“The price of Brent soared and hit a two-week high yesterday on news that Saudi-led coalition started air-strikes in neighbouring Yemen.”
“Regarding geopolitical risks, the talks between Iran and the world powers about its nuclear programme present larger risk for the oil price, in our view. If the agreement was reached and the Western sanctions were lifted, the country could increase its oil exports by 1 mbpd. This poses a clear downside risk for oil prices (especially in a situation of already oversupplied market).”
“Even though Yemen itself is a rather small producer of oil - in 2014, its average production reached 0.13 million barrels per day (bpd) – the news triggered a relatively large market response.”
“The key reason probably is that market worries about a possible disruption of oil flow through the narrow Bab el-Mandeb (about 3.8 mbpd), which is, however, not likely given the pledge of the head of the US forces in the region to keep the route open.”
“We therefore maintain our view that the oil price could decline in weeks and months to come and expect more significant price growth towards the end of this year. The balance of risks is, however, skewed in the direction of longer period of low oil prices.”