Taking mainly these factors into account SEB’s experts recently lowered their Brent crude oil price forecast with risk skewed to the downside. Nevertheless, they still anticipate record high global oil consumption in 2012.
While marginal unconventional barrels remain expensive to produce, middle distillate markets continue tight, geopolitical risk is extraordinarily high, and oil producers retain strong incentives to defend prices. Given all these factors, a deep, prolonged downturn in the oil market appears neither imminent nor likely unless the risk of a global recession increases significantly.
Most European refineries are now back online after pre-winter maintenance despite restart delays occurring. Production at Asian and Middle Eastern refineries has also largely resumed with the US also almost back to normal.
Over the last two months, oil product cracks have mainly trended lower in all parts of the barrel, in most cases from high levels. European temperatures remain relatively warm, depressing oil product demand, which is good news for the still tight middle of the barrel. Although refineries are back in production, easing worst fears of a middle distillate crunch, it is still too early to assume the threat has past. This part of the barrel will remain sensitive and should be monitored closely, particularly given its potential impact on overall oil sector sentiment.