Brent - Still trading in a sideways range

Brent 2014 forecasts range from around $98 - $110, with the main variance of forecasts being derived from the supply risk associated with Opec production. Some analysts think that the supply disruptions that we've seen over the past couple of year should persist whereas others are more optimistic around the supply side leading to lower estimates. The deteriorating political situation in Venezuela and the Libyan militants blocking some of the main ports disrupting exports are causing the most concern at the moment.  We should however continue to see strong demand coming from the emerging markets and Non-opec production driven from US and Canadian shale.


US oil prices will continue to be heavily influenced by the shale production and with limited export infrastructure currently in place, WTI's discount to Brent should persist on the short term.  The development of the Iranian nuclear program / lifting of international sanctions, this production has not been included in this years price forecast because of the time delay (6 - 9 months) of ramp up of production back up to 2m bpd from the current levels of 1m bpd so shouldn't be affected by this even after a firm deal has been agreed.

Taking a look at the charts, Brent's volatility has been significantly reduced over the past 8 months (other than the Syrian airstrike scare in early September).  It has found a range of which it seems very comfortable in $104 - $112.  As of late, it has been running out of momentum and given the position in the range, short term targets will be more on the downside at $109.10 and $108.00 (38.2% and 50% fibo retracements of Nov/Dec rally), below that, we would watch $106.50 for further support.  On the upside, a break above $113.00 would give a projection target of $119.05.



Charts sourced from ig.com