Oil prices are set to average between $81 and $100 per barrel over the next 12 months as demand destruction will help balance a market that continues to price in a lasting war risk premium, a Bloomberg Intelligence survey showed on Thursday.
More than 40% of the 126 respondents in the survey of asset managers and energy market strategists believe that demand destruction will be the single biggest driver of efforts at balancing the market amid the worst oil supply shock in history. Another 21% say that re-routing and adjustments to logistics will help to offset the shock loss of supply. OPEC+ spare capacity and policy response was picked by 13% as a factor in offsetting the supply disruption. But 12% of respondents said that “nothing will materially offset the disruption.”
As Brent Crude prices are expected to average nearly $100 per barrel over the next year, most survey participants also believe that oil prices will price in a risk premium of $5-$15 per barrel for years to come. Few expect the medium-term risk premium to be more than $20 per barrel.
Early on Thursday, Brent Crude prices rose by about 1% in Asian trade to $105 per barrel, rebounding slightly from Wednesday’s loss. The U.S. benchmark, WTI Crude, was also up by 1% early on Thursday, to $99 per barrel.
Oil prices plunged by about 5% on Wednesday following comments by U.S. President Donald Trump that negotiations with Iran are in the “final stages”.
Yet, market participants are wary of putting too much hope on the U.S. President’s comments in recent weeks.
“The oil market remains overly sensitive to Iran-related headlines, with participants continuing to pin considerable hope on reports that talks between the US and Iran are progressing,” ING’s commodities strategists Warren Patterson and Ewa Manthey said in a note early on Thursday.
“We’ve been in this situation multiple times before, which ultimately led to disappointment.”
By Tsvetana Paraskova for Oilprice.com
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