Bloomberg News

Oil May Fall to as Low as $85 a Barrel, Morgan Stanley Says

February 13, 2012

(Adds price forecast in the first paragraph.)

Feb. 13 (Bloomberg) -- Brent crude in London may fall to as low as $85 a barrel this year as supplies increase and global demand slows, said Morgan Stanley.

Crude inventories may increase in the first half of this year, putting pressure on prices to come lower if geopolitical tensions subside and no unplanned supply disruptions occur, Hussein Allidina, the bank’s head of commodity research in New York, said in a report today. Currently high prices and a weaker economic outlook will also slow demand, he said.

“Tight fundamentals are likely to erode into 2012 given recovering supply and slowing demand,” Allidina said. “Even if we are wrong, the high oil burden and weak macro should limit pricing upside from here.”

Brent oil for March settlement on the London-based ICE Futures Europe exchange was up 94 cents at $118.25 a barrel. The more-actively traded April contract was up 92 cents at $117.67. The European benchmark crude was at a premium of $18.65 to New York-traded West Texas Intermediate grade, compared with a record $27.88 on Oct. 14.

--Editors: Christian Schmollinger, Mike Anderson

To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net

To contact the editor responsible for this story: Mike Anderson at manderson34@bloomberg.net


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