Outlook for oil negative in H1 on oversupply: UBS

The report said the market is yet to see the end of the downside momentum following a drop of 12-15 per cent since the start of 2015.

By Staff Report

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Published: Fri 30 Jan 2015, 10:59 PM

Last updated: Thu 25 Jun 2015, 7:33 PM

Abu Dhabi: The outlook for oil prices in the short-term is forecasted to be negative due to oversupply. However, by the end of the year with non-Opec supply growth decelerating oil prices are expected to rise between $67 and $72 a barrel, said UBS Wealth Management in a latest forecasts.

The report said the market is yet to see the end of the downside momentum following a drop of 12-15 per cent since the start of 2015.

West Texas Intermediate for March delivery was at $44.41 a barrel on the New York Mercantile Exchange, down four cents, at 11.59am London time.  The contract dropped $1.78 to $44.45 on Wednesday, the lowest close since March 2009.  Brent for March settlement was 37 cents higher at $48.84 on the London-based ICE Futures Europe exchange. It slid $1.13 to $48.47 on Wednesday.

Investors are being urged to avoid direct exposure to oil, with the lack of supply adjustments from Opec keeping oil prices lower and providing backdrop for further price extremes over the next three months. The report indicated that over the first half of 2015 oil oversupply is expected to hit 1–1.5 million barrel per day.

Although the oil market is rebalancing, as seen by the considerable curtailments in capital spending, there will be a lag in the impact on supply, UBS research said.

Mark Haefele, global chief investment officer of UBS Wealth Management, said: “The outlook for oil in the first half this year remains negative, amid the lack of immediate supply adjustments in an oversupplied market. That said, with non-Opec supply growth decelerating and demand for oil improving in the second half of 2015, we expect oil prices to rise and trade around the $70 dollar per barrel mark as we head in to 2016.”

The report said there is a 25 per cent probability that Brent and West Texas crude oil prices could stay below $40 per barrel over the next six months.

— haseeb@khaleejtimes.com 



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