OIL: SAG fundamental change, $ 70 / barrel POSSIBLE – SG – Dagens Industri

OIL: SAG fundamental change, $ 70 / barrel POSSIBLE – SG – Dagens Industri

OIL: SAG fundamental change, $ 70 / barrel POSSIBLE – SG

                  2014-11-24 15:38
             

 STOCKHOLM () The last six months of lower oil prices is not just a temporary decline, but the result of a fundamental change in the market. Such changes occur only every ten or every twenty years and has major effects on rows of asset classes.
  It says French Societe Generale, which made an indepth study of the oil sector.
  Since June, when Brent crude reached $    115 per barrel, the price has fallen by 30 per cent to today around 80 dollars.
  "What sets the price movement from the others we've seen recently is that the root cause of the excess supply is not temporary. Oil markets have undergone a structural change," writes Societe Generale.
  Oversupply associated with the high output growth of shale oil in the US, which means that the country's importance as oil importer decreases rapidly.
  "Moreover, Libya's output recovered sharply between June and October," notes Bank analyst Mike Wittner.
  Another factor that affects the supply  is that global supply shocks decreased during the year, after increasing in 2012 and 2013. These include, for example sanctions against Iran.
  "Over a long period of accelerated disturbances significantly, which compensated for the increase in production in the United States. But now they do not increase anymore, they reduce" adds Mike Wittner.
  In addition, weaker demand in the wake of lower global growth than previously expected.
  The key to price developments in the near future, the OPEC meeting which starts on Thursday 27 November. Société Générale basic scenario is that Saudi Arabia will ultimately get with the other members on a production cut of 1-1.5 million barrels per day, which would result in an average price of around $    90 per barrel for Brent crude during the 2015th
  To balance the market a real choice decrease of at least 1 million barrels. According to the bank, the likelihood of such an outcome is not higher than 60 percent.
   An alternative development is that the Saudis continue to do what they have said they will do, that is to say, they let the market take care of both supply and prices on their own without joint agreements within OPEC. The probability of this judge Societe Generale to 40 percent.
  Such a development would drive down the price of Brent crude to around $    70 for 2015 and 2016. Not even lower prices are expected associated with the production of shale oil estimated to be about $    65 per barrel.
  Falling oil prices would mean that the prices of other oil products, natural gas and coal drops. Also other commodities like corn, cotton and gold expected to be affected in the direction of lower prices. 

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