Brent crude oil could spike to $175 in 2012 : BoAML - Financial Times

LONDON: Brent crude oil futures could spike up to as high as $175 per barrel briefly next year if the global oil market stays tight, Bank of America Merrill Lynch said on Wednesday.

The bank's research team said in a note that the North Sea benchmark was likely to average $114 per barrel in 2012, compared with a projected average of $109 this year, and it saw room for U.S. light crude to trade near $102 in 2012.

It raised its forecast for Brent to an average of $102 in the fourth quarter of 2011, $8 higher than its previous forecast, saying it did not expect Libyan oil to return to world markets until the end of next year.

If Libyan oil takes much longer to return to the market, and other supply and demand fundamentals remain very bullish, there it a chance of a very sharp rise in prices, the bank said.

"If Libya does not come back on line next year, global growth holds up as expected and monetary policy remains ultra loose, we believe Brent crude oil prices could briefly spike to $175 per barrel next year," Merrill Lynch said.

The bank left its forecast for U.S. light crude oil futures, known as West Texas Intermediate or WTI, unchanged for the fourth quarter of 2011 at $88 per barrel.

"We have pushed back our assumptions on the return of Libyan supplies to 2H 2012, but we now see additional barrels from Saudi Arabia and non-OPEC providing some relief to the market in the coming months," it said in a research note.

Merrill Lynch said European and U.S. economic data had surprised on the downside this year, just as oil demand was set to slow seasonally in September, creating "near-term downward pressures on oil prices".

"We do acknowledge some downside risks to this forecast if shale oil output in the Midwest surprises to the upside."

But it was still bullish on the outlook for oil next year. "Global oil markets remain structurally under-supplied relative to the expected pace of economic growth," it said.

"As such, we see global oil demand growing at a rate of 1.5 million barrels per day (bpd) or 1.7 percent in 2012, underpinned by a global real GDP rate of 4.8 percent.

"Growth in global oil demand will once again come mostly from emerging markets, while we project outright declines for OECD demand," Merrill Lynch added.

It said several factors could derail its outlook, including a European recession, which it did not expect.