Brent oil price could trade back under $100 soon as European growth stalls

The price of Brent crude oil could well set course to trade back under $100 a barrel soon as European growth looses nearly all momentum as the debt crisis for EU member states bites deeper with governments scrambling as they can to find some momentum.

Latest Brent Oil Price

In London, Brent crude oil futures for July 2013 delivery ended Friday’s trading session at $102.66 a barrel on the ICE Futures Exchange. The European oil contract is trading around 12 percent lower than levels seen earlier this year. Brent oil prices sank to a three week low at $100.64 on Thursday, sinking on the back of poor Chinese economic data and US Federal Reserve comments.

Cutting Oil Price Forecasts

Goldman Sachs sees near term headwinds to real growth improvement and the rise in unconventional supply in US and suburbs to rein its prices. Similarly US Energy Information Administration (EIA) and Barclays has cut oil price forecast based on sluggish global demand and rising US output.

It would be logical to say that the overall sentiments are not bullish at all, especially with excessive supply cushion and no significant improvement of growth in the global trio, China, the United States and the EU.

European Union to Implode?

Last Tuesday the Italian prime minister warned that the European Union could implode unless leaders do more to deal with its economic crisis and the record levels of youth unemployment. Enrico Letta, whose popularity has fallen steadily since he was sworn in last month, told the Senate in Rome that EU leaders must show decisive action.

“I have the impression that the EU cannot keep going as it has up to today, with timidness or a lack of decisions. Either it accelerates or it risks imploding…. As things are, I don’t think it can hold up and the people will be the ones who make it implode the next time they vote.”

Falling growth in the euro zone tends to see lighter oil demand and prices could head lower in line with recent European stock market declines. European stock markets added to last Thursday’s sharp losses on Friday, tracking stock futures lower in the US where investors grew cautious ahead of this weekend, offsetting better than expected economic data. The Stoxx Europe 600 index closed out the week 1.8 percent lower.

European Oil Demand

Weaker European oil demand is now being forecast for 2013 as well as higher crude oil supply predictions from the IEA (International Energy Agency). The IEA forecasts 8 percent growth in world oil demand on aggregate between 2012 and 2017, while supplies outside OPEC are expected to rise by 10 percent.

“The oil market is getting into what I think will prove to be the top end of the range. Primarily the outlook for demand growth is pretty moderate and the markets are well supplied with high inventory levels.” according to CMC Markets chief market analyst Ric Spooner.

“It seems that the recent disappointing macro numbers from China continue to weigh on market sentiment, raising further concerns about a slowdown in the oil demand.” said a report from Sucden Financial Research, London.

Meanwhile, the US API (American Petroleum Institute) had said in a statement on Wednesday that US crude oil stocks for April ended at 388.9 million barrels, the highest inventory level for the month since 1981.

Read the original:
Brent oil price could trade back under $100 soon as European growth stalls