The world’s most heavily traded commodity is a key part of any trading or economic outlook. So this is our Crude Oil Price Forecast for 2013. Given it is used for so many aspects of everyday life, from transport to manufacturing and just about everything in between, Crude oil represents a massive building block in any kind of investing decision.
Firstly, lets look at the demand side, for Crude Oil. Essentially, crude oil demand is what economists call relatively in-elastic. What that means is whether prices are higher or lower, demand is largely unchanged. Think about your own petrol consumption. Do you make a concerted effort to drive less when the petrol price is higher on any given day?
Probably not and, as a result, supply is generally considered to be the more significant variable in the equation. Acts of terror, natural disasters, War, political tensions and unrest all impact on crude oil prices – and generally in a very marked way. As a result, as one of my learned colleagues often says, the risk is always on the upside, with Crude.
Globally, demand for crude oil is changing. We have seen a major shift in energy consumption, particularly from China. With millions of new cars hitting the streets each year, Chinese demand had been rising strongly, but is now in decline. In part, this has been a solid offset for weaker demand elsewhere, given the slowing global economy – a Yin and Yang – if you like! OPEC, particularly the Saudis’ have also been increasing their production to the highest levels in 23 years. With a stated goal to get Brent Crude back under $100, as well as weaker demand from Europe and a slower Chinese demand, this may well prove the case.
However for our Crude Oil Price Forecast 2013 we need to remember that the Middle East and supply remains the key issue. With the political situation in Syria continuing, and likely to eventually resolve itself with a regime change (without US intervention), Iran would be the only remaining state in the region where the US may have question marks over leadership and long term alliance with rather than against the US. With that in mind, a regime change there (not to mention Libya and Egypt) may see some of the risk premium in oil fall away.
One report I read recently suggested as much as $30 a barrel is risk premium built into the price. A fall of that magnitude would be equivalent to a major global tax cut in the trillions of dollars – something that would be a most welcome respite for the global economy and a major stimulus that would no question help avoid some of the severity of a full blown recession.
Then of course with Israel and Palestine currently slugging it out, all bets are off! In reality a peaceful outcome is needed there and pressure will mount over coming weeks for that to happen. Assuming this being the case, our outrageous prediction for oil a move South.
Currently oil is trading at $88 and a price of below $75 a barrel is not out of the question. Remember 1c move in oil is $10 per futures contract – getting a Trade like this right can be a real game changer for you, but of course is not without its risks – always use your stops!
Like all forecasts or predictions given at any time, these can very quickly become out of date. This is a critical point when it comes to successful trading and investing. It is not really about successfully predicting what may happen – the real money is made by responding to what is actually happening and by taking the necessary action accordingly. For many, joining the dots between theory and practise can seem daunting and perhaps confusing so, to make that journey so much easier and one that caries confidence, why not check out one of our free online training sessions. Click here to register