Oil Trades Above $130 After Brent Oil Forecast
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Crude oil was little changed above $130 a barrel in New York after rallying yesterday on a Morgan Stanley forecast that Brent oil from the North Sea could “easily” reach $150 a barrel.
Prices rose yesterday because “supply constraints are biting against the backdrop of still-strong global demand,” the co-head of global economics at Morgan Stanley, Richard Berner, said in a report. Oil rose last week after Societe Generale SA and Credit Suisse increased their price outlooks.
“When these price forecasts come out, traders don’t want to be short, so they are in a way self-fulfilling prophecies,” the managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Mass., Sarah Emerson, said. Shorts are bets that prices will fall.
Crude oil for July delivery fell 32 cents, or 0.2%, to $130.71 a barrel at 8:44 a.m. in Sydney in after-hours trading on the New York Mercantile Exchange. Yesterday, prices climbed as high as $131.58 and fell as low as $125.96. Futures reached $135.09 on May 22, the highest since trading began in 1983.
“Prices are swinging wildly back and forth, which indicates that the market needs to find equilibrium,” the director of research at IAF Advisors in Houston, Kyle Cooper, said.
Brent crude oil for July settlement rose $2.62, or 2%, to settle at $130.93 a barrel on London’s ICE Futures Europe exchange yesterday. The contract touched a record $135.14 on May 22.
Oil advanced above $127 for the first time on May 16 when Goldman Sachs Group Inc. boosted its estimate for the second-half of the year to $141 a barrel, from $107, citing supply constraints. Goldman analyst Arjun Murti wrote in a report on May 6 that “the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.”
“While prices are high enough to curb demand in the developed economies, we think that supply limits could easily take Brent crude quotes to $150 a barrel,” Mr. Berner, who is based in New York, said in the report. Morgan Stanley is the second-biggest American securities company.
