Brent crude prices, the benchmark for half the world’s oil, will weaken for a second year in 2014 as U.S. output expands and threats to Middle East and North African supply ease, the most-accurate forecasters said.
Prices will average $105 a barrel in 2014, from $108.71 in 2013, according to the median of estimates from the seven analysts who most accurately predicted this year’s level in a survey last December. Brent averaged $111.68 in 2012.
Global supply is expanding as the U.S. pumps oil trapped in shale-rock formations, driving domestic output to the highest in a quarter century and curbing demand for the crude priced off Brent. Iran, Iraq and Libya will also produce more in 2014, the forecasters said. While a second annual drop for Brent would be the first consecutive retreat since 1998, prices are still about 39% higher than the average over the past decade.
“We’re expecting a surplus,” said David Bouckhout, the senior commodity strategist at Toronto-Dominion Bank in Calgary who was jointly the most accurate forecaster. North American “supply growth is going to remain robust and cover the expected increase in demand. The biggest concern for 2014 on the supply side is going to be Iran, while Iraq is another producer that certainly wants to see its production grow.”
Brent for February settlement lost as much as $1.27 to $110.91 a barrel on ICE Futures Europe exchange today, leaving prices little changed compared with the start of the year. Hedge funds and other speculators boosted positions in the grade by 41% in the week to Dec. 24, restoring bullish bets from their second-smallest level this year, bourse data show.
West Texas Intermediate, the U.S. benchmark, slipped 46 cents today (NYMEX:CLG14) after settling at $100.32 a barrel on the New York Mercantile Exchange on Dec. 27. The grade is poised for an annual gain of 8.8%. The spread between WTI and Brent averaged $10.67 this year, compared with $3.93 over the past decade. The widening gap reflects an abundance of U.S. supply at a time of disrupted exports from Iran, Iraq and Libya.
The three most-accurate forecasters from last year’s survey were Christin Tuxen, a senior analyst at Danske Bank A/S in Copenhagen, Thina Saltvedt, an analyst at Nordea Bank AG in Oslo, and Toronto-Dominion’s Bouckhout.
Mike Wittner, head of oil market research at Societe Generale SA in New York, ranked fourth. Francisco Blanch, head of commodities research at Bank of America Corp. in New York, Jeff Currie, head of commodities research at Goldman Sachs Group Inc. in New York, and Jochen Hitzfeld, an analyst at UniCredit SpA in Munich, were joint fifth.