Brent crude oil hovers near $108 as 2012 price forecasts remain mixed

The price of Brent crude oil hovers near $108 a barrel in light trading this morning as 2011 comes to a close, oil price forecasts for 2012 remain mixed and heavily dependent on the situation in the Middle East, together with the debt situation that shadows Europe.

Latest Brent Oil Price

In London, Brent crude oil futures for February 2012 delivery was trading at $107.90 a barrel, 08.03 GMT this morning on the ICE Futures Exchange.

The European oil contract closed yesterday’s trading session at $107.42 a barrel, or 1.7 percent lower on the day.

Brent Oil Price 2011

Brent crude oil prices grew from around $94 a barrel at the start of 2011 to around $108 now. The Brent oil contract spent most of the year within the $100 to $120 range, spiking to $126 in April.

Brent Oil Price Forecast 2012

Marco Dunand, chief executive of Mercuria Energy Trading, said world oil supplies were tight and this would probably keep prompt prices for ICE Brent above forward barrels with the market in backwardation for the foreseeable future.

“We see $100 as a floor for Brent going into next year unless OPEC decides to change their policy and supply extra barrels to the market. We anticipate a situation where the market will remain reasonably tight for a while.” Dunand said.

Dunand predicts that a major geopolitical shock, such as a war between Iran and the west which could close the Hormuz Strait in the Middle East Gulf, would push oil prices up very sharply.

“With the situation in the Middle East, there are risks to the upside. The market has already started pricing in some sort of Iranian tension or conflict, but obviously the market would have a long way to go if there was a serious conflict.”

Europe – Middle East – America

The risk of reduced Iranian supply has offset demand fears arising from the deepening crisis that shadows Europe, which threatens to knock global economic growth and send the west back into another big slump.

BP chief Bob Dudley warned today that the fragile economic recovery could be negatively affected by high oil prices, especially in America.

Speaking at the world’s largest oil and gas producers gathered in Qatar, Mr Dudley said: “It is important in the current situation of a fragile global economy and I think right now we are probably walking a fine line.”

“It is impossible to say what price exactly will affect the economic recovery but we do know which regions will be affected most.” he said, adding that the United States was most vulnerable because of its slim fuel tax buffer to soften the blow of rising oil prices through pump price tax cuts.

Meanwhile, banking giant Goldman Sachs senior commodities analyst Allison Nathan said the bank forecasts Brent Crude oil prices to reach $130 within the next year.

Speaking at a press briefing in Singapore she said the growth in the developed economies will be weak but the emerging economies are expected to make up for the weakness in demand for commodities and oil prices.

Citigroup analysts have upped their forecast that Brent crude oil prices should trade in a range of $100 to $120 a barrel and to average $110 for 2012, up from their previous forecast of $86 per barrel for Brent, which was set in August this year.

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Brent crude oil hovers near $108 as 2012 price forecasts remain mixed