Brent Heading Lower, But Big Support At USD100/bbl
Front-month Brent crude has broken below multi-year uptrend support at USD106/bbl and this bolsters our bearish multi-month outlook. Brent prices have been dragged by positive supply news emanating from Iraq and Libya, two OPEC members that have been producing significantly below their potential. While these developments could prove positive for Brent supply in the coming months, there are significant risks that we highlight below. On the whole, we retain a bearish medium-term outlook on Brent prices but expect significant support around USD100/bbl. We continue to forecast an average Brent price of USD105/bbl in 2014 and USD102/bbl in 2015.
Positive Supply News, But Risks Remain
A break by front-month Brent crude below support at USD106/bbl and an erosion of the backwardation at the front end of the futures curve illustrates expectations that near term market supply will improve. Brent prices have been dragged lower by positive supply developments:
|USD100/bbl In Sight|
|Front-Month Brent Crude, USD/bbl (Weekly Chart)|