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Sunday, November 19, 2017

VTB energy price forecasts remain unchanged

Russia's VTB recently said that, based on initial data, it has not changed its forecast for 2014 energy prices.

"Brent traded within a narrow range in January despite market concerns about over-supply. In fact, the initial evidence is that the anticipated call on OPEC crude in 2014 is being increased on raised demand estimates, while OPEC output remains at or below 30mmb/d. Brent averaged USD 107.24/bbl for the quarter, slightly ahead of our USD 105/bbl forecast," VTB Capital analysts Colin Smith and Marc Jacouris said. "We make no changes to our current forecasts, apart from mark-to-market changes to our WTI forecast. We have also adjusted our GBp-denominated European hub gas price to reflect changes in VTB Capital's FX forecasts.

The sharp sell-off in Brent that started in late December quickly stabilized in early January around the USD 107/bbl level and remained within a tight, USD 2/bbl range for the rest of the month. The WTI-Brent spread started the month at -USD 12.38/bbl, quickly widening to the USD 15/bbl mark before closing through the rest of the month to end just below USD 9/bbl."

"We believe that OPEC will continue to target USD 100/bbl Brent and will endeavor to maintain production at around 30mmb/d in order to do so. We expect that Saudi Arabia will be willing and probably able to accommodate changes elsewhere within OPEC, based on a scenario analysis," Smith and Jacouris said. "It is clearly early in the year and it is likely that pressure within OPEC will grow, but the year has got off to a fairly robust start so far as oil prices are concerned."