Why Crude Oil will Be Below $100 per barrel in 2012

abarrelfullabarrelfull wrote on 29 Jul 2011 06:53
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Crude oil prices are up sharply in 2011, not least due to the events in Libya. There are those who are worried about crude prices rising even further. Apparently many are making bets that crude could be at $120 per barrel by December. I beg to differ. My prediction is that 2012 will see crude at sub $100 levels, and I am talking about Brent.

Why?

  • Libya may be a long way from a solution, but this could change at anytime and the current stalemate could lead to a partial resumption of exports
  • A major factor in the current prices is the WTI discount, which is driving demand in the USA. Renewal of contracts for WTI indexed crude will reduce the difference, driving down the price of Brent crude in the process
  • Increased supply from the USA, Canada, Iraq and elsewhere will help meet demand

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