Analysts expect crude oil prices to be volatile in 2013

Analysts expect crude oil prices to be volatile in 2013 because of mixed signals on the demand and supply front.

Although the International Energy Agency (IEA) expects crude oil demand to rise in 2013, slowdown in the global economy indicates that growth in demand may be muted.

IEA has forecast global demand to rise by 865,000 barrels a day to 90.5 mbpd in 2013. However, the World Bank reduced its growth forecast for the developed nations to 2.4 per cent for 2013, signalling lower growth in demand for crude oil.

Also, the ongoing concerns over the debt ceiling in the world’s largest economy USA and the sovereign debt crisis in Europe could keep sentiments weak in the short term, traders feel.

Most analysts expect Nymex crude oil prices to trade between $88 and $100 a barrel and on the MCX between Rs 4,800 and Rs 5,400 a barrel in the January-March quarter, from Rs 5,120 per barrel on the MCX now. Brent crude oil prices are expected to trade in the range of $105-120 a barrel (CMP: $110 a barrel).

Supply response by Opec countries would also influence crude oil prices in the medium term. Although, Opec cut its output by 465,000 barrels a day in December to 30.4 million barrels per day (mbpd), the lowest level since October 2011, it expects further reduction of 800,000 barrels a day to arrive at an average of 29.6 mbpd in 2013.