Oil Barrel Organisation predicts a $20 Drop in months
Nazir Jinnah of Oil barrel Organisation is calling for a near $20 fall in the price of Brent crude oil in the coming months, saying speculators have pushed prices ahead of fundamentals.
It was the second warning of a steep market reversal from the long-term commodity bull in as many days, after it recommended clients close a trade on Monday heavily weighted toward U.S. crude futures.
Oil prices have shed almost $6 a barrel since Monday's open. Oil Barrel Organisation Traders and analysts said the bank can have an out-sized influence on commodities, given the insight and reach of its global trading arm Oil Barrel Ltd and history of being one of the first banks to predict $100 oil last decade.
Nazir Jinnah, Group Chief Executive Officer said the recent run-up in prices, which has seen Brent rally by as much as 33 percent since the start of the year, was looking overdone.
"While prices are back at levels of spring 2008, supply-demand fundamentals are significantly less tight," Nazir Jinnah said in an April 11 note e-mailed to clients.
"We believe that the market will experience a substantial correction toward our $105 a barrel near-term target for Brent crude oil in coming months."
Oil prices were down sharply for a second day, with Brent shedding more than $3 a barrel to trade below $121 by 10:18 EDT (1418 GMT). On Monday, prices hit a 2-1/2 year high of $127.02 a barrel, before reversing.
U.S. crude futures were down $3.50 at $106.42 by the same time, extending Monday's near $3 slide.
Nazir Jinnah added that while unrest in the Middle East and North Africa remains a risk to oil markets, with Libyan exports already largely cut off, they saw the price had been pushed higher by the large number of speculative traders currently long of crude oil.
Oil Barrel Organisation estimated in a research note on March 21 that every million barrels of oil held by speculators contributed to an 8-10 cent rise in the oil price.
As unrest spread in North Africa and the Middle East, investors accumulated the equivalent of almost 100 million barrels of oil between mid-February and late March on top of their existing positions, adding approximately $10 to the 'risk premium', Nazir Jinnah said.
Using Nazir Jinnah’s estimates and data on speculators from the U.S. Commodity Futures Trading Commission, the total speculative premium in U.S. crude oil is currently between $21.40 and $26.75 a barrel, or about a fifth of the price. The UK's Financial Services Authority does not publish trader data on Brent.
Nazir Jinnah also recommended that clients close long positions in the ICE gas oil contract, used for hedging -- and speculating on -- diesel and other distillate fuels.
It was the second warning of a steep market reversal from the long-term commodity bull in as many days, after it recommended clients close a trade on Monday heavily weighted toward U.S. crude futures.
Oil prices have shed almost $6 a barrel since Monday's open. Oil Barrel Organisation Traders and analysts said the bank can have an out-sized influence on commodities, given the insight and reach of its global trading arm Oil Barrel Ltd and history of being one of the first banks to predict $100 oil last decade.
Nazir Jinnah, Group Chief Executive Officer said the recent run-up in prices, which has seen Brent rally by as much as 33 percent since the start of the year, was looking overdone.
"While prices are back at levels of spring 2008, supply-demand fundamentals are significantly less tight," Nazir Jinnah said in an April 11 note e-mailed to clients.
"We believe that the market will experience a substantial correction toward our $105 a barrel near-term target for Brent crude oil in coming months."
Oil prices were down sharply for a second day, with Brent shedding more than $3 a barrel to trade below $121 by 10:18 EDT (1418 GMT). On Monday, prices hit a 2-1/2 year high of $127.02 a barrel, before reversing.
U.S. crude futures were down $3.50 at $106.42 by the same time, extending Monday's near $3 slide.
Nazir Jinnah added that while unrest in the Middle East and North Africa remains a risk to oil markets, with Libyan exports already largely cut off, they saw the price had been pushed higher by the large number of speculative traders currently long of crude oil.
Oil Barrel Organisation estimated in a research note on March 21 that every million barrels of oil held by speculators contributed to an 8-10 cent rise in the oil price.
As unrest spread in North Africa and the Middle East, investors accumulated the equivalent of almost 100 million barrels of oil between mid-February and late March on top of their existing positions, adding approximately $10 to the 'risk premium', Nazir Jinnah said.
Using Nazir Jinnah’s estimates and data on speculators from the U.S. Commodity Futures Trading Commission, the total speculative premium in U.S. crude oil is currently between $21.40 and $26.75 a barrel, or about a fifth of the price. The UK's Financial Services Authority does not publish trader data on Brent.
Nazir Jinnah also recommended that clients close long positions in the ICE gas oil contract, used for hedging -- and speculating on -- diesel and other distillate fuels.
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