Commodity Online
Weak US GDP growth forecast for 2011 could impact North America oil demand while ample liquidity conditions and a second round of quantitative easing ahead should support crude oil prices, according to an analysis by Bank of America-Merrill Lynch (BofAML).
BofAML ahs revised its its US GDP growth numbers to 1.8% for 2011 from 2.3% earlier. Consequently, BofAML has projected OECD North America oil demand growth numbers for 2011 of 105 thousand b/d, particularly if slower US economic growth significantly impacts Mexico and Canada
Emerging markets on the other hand are expected to clock a growth of 6.1% in 2011 enabling a global growth possibility of 4%. BofAML predicts an oil demand growth of 1.6 million b/d in 2011.
Supportive factors for crude oil are emerging economy growth and OPEC no longer adding barrels to the market. In particular, Saudi Arabian production has barely changed for several months now in
response to a deteriorating economic environment. The Still high oil stocks and decelerating cyclical conditions in the US are creating some downside risks to rpices in the short-run, BofAML analysis said. It has maintained its 2011 Brent and WTI forecast at $85/bbl, compared to a forward of $81.80/bbl.
OECD oil demand is dismal and total oil demand growht of only 20,000 b/d is forecasted this year and 50,000 b/d next year, BofAML analysis said.
The very high levels of crude oil and petroleum product inventories in the United States are still creating some downside risks to oil prices in the short-run, the analysis added. More broadly, very high inventories at Cushing suggest that timespreads could temporarily weaken further until crude oil inventories in PADD2 come down to
more normal levels. With demand decelerating, a sharp drawdown in stocks is unlikely, suggesting there are some downside risks to oil prices in the
short-run.
European sovereign debt crisis highlighted the downside risks to prices of economic shocks under high inventory level situations, and OPEC has responded effectively. In our view, this suggests that any downside risk to oil prices will be limited to near-term cyclical pressures, BofAML analysis said.
