A Reuters poll showed a higher average price for benchmark Brent crude this year than from the same survey last month, although analysts held to their view of lower prices than last year. Oil prices were expected to fall this year as the market deals with subdued demand growth and increasing production, the Reuters poll showed.
The February oil price survey of 32 analysts forecasts North Sea Brent crude oil will average $105 a barrel in 2014, below last year's average of $108.70, and against $104 in the January poll. Growing production from Iraq, the possible return of sanctions-bound Iranian exports and supply growth in non-Opec nations led by the United States' shale revolution, will keep a lid on prices, analysts said.
"Oil market will switch focus from Middle East tensions and rising production as a result of economic recovery to confirmation of ample, and in some cases even rising, production," ABN Amro energy economist Hans van Cleef said. A shift towards other fuels like natural gas in developed nations and removal of subsidies in developing countries will lead to reduced growth in oil demand, said Rahul Prithiani, director at CRISIL Research.
The analysts surveyed forecast US light crude, also known as West Texas Intermediate or WTI, would average $96.40 a barrel in 2014, down from the $98.04 average in 2013. WTI has averaged $97.23 so far this year, while Brent averaged $107.86. Brent's premium to its US counterpart was seen narrowing to $8.50 per barrel from last year's $10.58.
Analysts expected a narrower spread as new pipelines would ease the logistical constraints at Cushing, Oklahoma, the delivery hub for WTI, that have kept inventories high and have depressed the US benchmark. Raiffeisen Bank International had the highest Brent forecast at $115 for 2014, while Capital Economics had the lowest at $95 per barrel. The poll showed that Brent would average $103 in 2015, while WTI would average $95.70 next year.