Americas News
ICAP, Trafigura Offer Differing Views on Crude's Immediate Future
Those who are weary of conflicting forecasts about what will happen to the crude market in the foreseeable future would no doubt have been further frustrated by two wildly conflicting outlooks offered on Wednesday by two major experts in the field, one purely from a numbers perspective and the other more concerned with global production.
Walter Zimmermann, registered futures broker at ICAP, delivered bearish forecast for both Nasdaq and crude to Bloomberg television: specifically, he charted "an ominous rising bearish wedge" of diminishing momentum in trading patterns for Brent, at the top of which is a 59 percent bulls on the market vein of bullish consent that he said hasn't been seen since August of 2013, when Brent plummeted to $27.10.
He remarked, "That many bulls at the top of the rising wedge is scary" because it usually leads to a multi-year decline in prices rather than a correction.
Meanwhile, executives at Trafigura told the Argus Global Crude Conference in Geneva that output from the U.S. and other countries will not be able to comfortably fill a gap in supply once its sanctions on Iran oil exports come into play next month, and that this would contribute to more upward pressure on global prices next year.
Ben Luckock, co-head of oil trading for Trafigura, said, "There's OPEC [the Organization of the Petroleum Exporting Countries] production rise, the trade war and macro clouds, but we think that some of these upside risks are being underplayed: risk is more to the upside.
"Under-investment is taking its toll in countries that we don't talk about every day: we see $1 trillion of under-investment globally, particularly in deep and ultra-deep, [and] these are long lead time projects that you can't replace quickly."
Luckock predicted an unusual spike in crude demand from refiners next year as new plants come on stream: "About 1.5 million barrels per day over the next 12 months; there are a couple of big ones [plants] in China, Malaysia, Turkey, Saudi Arabia, which is new demand."
Meanwhile, the main source fueling analytical expectations of higher prices - Iran - continued to feverishly dispense rhetoric about its situation to media, this time in the form of Ali Kardor, head of state-run National Iranian Oil Company (NIOC): he remarked, "The president of America has done whatever he can and he knows very well that getting Iran's oil exports to zero was a political bluff."
He added that Iran did not have any difficulties receiving payments for oil exports and could accept payments in euros instead of dollars if necessary: "With European support there will not be a problem" - a reference to the European Union considering setting up a Special Purpose Vehicle to facilitate trade with Islamic republic.
For the record, if Kardor's rosy scenario for the Iranians came to pass, this would mean crude prices would likely not spike, especially if one factors in the widespread contention that demand in many countries will lessen in coming months.
The utter lack of unity in crude market forecasting was made abundantly clear last week when Trafigura, Vitol, Goldman Sachs, and other highly respected organizations predicted prices in the near-term anywhere from $65 to $100 per barrel.
