Crude oil prices: a meeting with Guy Maisonnier, economist at IFP
October 2009
The price of oil seems to have found a balance around $ 70 / b. Is this relative stability lasting?
Is the price of crude oil, which is around $ 70 / bbl, in the stabilization phase?
GM: the current stability is quite relative. The price of crude oil in fact experienced strong variations ranging between $ 60 and $ 70 / b from June to mid-July, then between $ 66 and $ 74 / b in August and September. The downward corrections occurred during periods of doubt about the recovery. In early July, uncertainty about the companies' quarterly results encouraged profit-taking on the stock and oil markets. The same phenomenon occurred in early September when a feeling of concern prevailed over future growth in the private sector. The issue is linked both to demand given the rise in unemployment and to future investment due to the low number of credits granted. The upward revisions to growth announced at the start of September by the IMF and the OECD have nevertheless stabilized prices, but the situation remains fragile.
Apart from the link with the stock markets, what is the impact of the Euro?
GM: there is indeed a link with the stock markets, economic indicators influencing the two markets in the same direction. The link with the Euro can be analyzed from two points of view, financial and physical. From a financial point of view, investors turn to the dollar in uncertain times and conversely opt for other currencies and commodities in more optimistic times. It would be an explanation of the parallel (but not systematic) movements observed. From a physical point of view, the weak dollar dampens the rise in oil and has less impact on consumer behavior. It is therefore a factor of potential tensions which can self-fuel the rise in oil.
Should we expect high volatility in the coming months?
GM: this is likely given the fragile economic context. The financial markets react fairly strongly to economic indicators published regularly such as confidence indexes, the unemployment rate or to stay in the oil sector, stocks of crude oil and petroleum products in the United States. The market has been in the consolidation phase since the end of September, pending quarterly results to define a trend, while the indicators are still uncertain.
In strong trend, given the IMF vision of a timid global recovery in 2010 (readjusted to 3,1% in early October against 2,5% in July) and more sustained in 2011 largely driven by emerging countries, we can generally expect an upward trend with periods of consolidation.
Is it possible to give orders of magnitude?
GM: if we retain the IMF scenario, the Brent price should continue to rise and stay above $ 65 / b. However, a price surge in the next few months is unlikely since the supply / demand balance is not very tight due, on the one hand, to the expected weakness in growth and, on the other, OPEC production margins. The upward trend will be driven mainly by forward prices which currently anticipate $ 80 to $ 85 / b in the next 5 years. The equilibrium will therefore remain unstable subject to short-term downward pressures (surplus production) and upward pressures in the medium and long term. Strong corrections thus remain possible, but the general trend should gradually push prices up.
80 $ / b for 2010, against around 60 $ / b in 2009, constitutes a possible average level close to the hypothesis adopted by the IMF (76,5 $ / b). This scenario does not take into account the numerous hazards (geopolitics, climate, pandemic, etc.) likely to significantly modify this trajectory. It is essential to recall the context in which forecasts are made, particularly in this period of great uncertainty.
Oil prices in 2009 (Brent spot and futures market)
1: - / + Search for an equilibrium price in January (Uncertainties: Demand? OPEC management?);
2: + OPEC overruns on January confirmed (+ 1,3 Mb / d);
3: + Stock market optimism from March 9; OPEC meeting of March 15 aimed at respecting quotas;
4: - Bearish correction; Ultimatum on March 29 on the American automobile industry;
5: + The "G20" of April 2 gives new hope;
6: - / + New fall in demand forecast for 2009 but drop in OPEC overruns (+ 0,7 Mb / d);
7: + Anticipation of recovery (stock market effect) and Euro effect;
8: - / + Consolidation of stock markets; Tensions in Nigeria;
9: - Concern about the results of the companies, stock market effect;
10: + Resumption of the stock markets after the publication of satisfactory results;
11: - Uncertainty about future private growth; Awaiting quarterly results;
12: + Vision of a gradual economic recovery.
Source: http://www.ifp.fr/espace-decouverte-mie ... te-a-l-ifp