Deutsche Bank Clips 2014 Crude Oil Forecast

Oil refineries

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Crude oil prices will decline in 2014, according to forecasts by Deutsche Bank AG (NYSE:DB). An email report on Tuesday said that the per barrel cost of U.S. West Texas Intermediate would fall from $98.59 to $88.75 next year. Bloomberg printed data from an email the bank sent. Brent, another key benchmark in oil prices, is also set to decline. Averages for 2014 will be $97.50 per barrel; in 2013, the averages were $108.91 a barrel.

High production rates in the U.S., and potential for increased output by Iran and Libya, caused Michael Lewis, Deutsche Bank’s head of commodities research in London to predict a “bearish environment” for oil exports in 2014. “We see the growing risk of an oil supply glut developing,” Lewis said.

BNP Paribas SA, Citigroup Inc. (NYSE:C), and Deutsche Bank all find that OPEC members will need to reduce output to prevent the market being oversupplied in 2014. “Downside risks to the oil price may require OPEC to cut production to defend oil prices,” Deutsche Bank stated. OPEC however, has no plans of cutting production.

OPEC concluded its 164th meeting and issued a statement on December 4. In preparing its outlook, it took into consideration “the high sovereign debt in the Euro-zone; high unemployment in the advanced economies, especially the Euro-zone; and slow growth, coupled with inflation risk, in the emerging economies.”

For OPEC, the greatest hurdle to cross in 2014 will be continuing “global economic uncertainty.” Instability did not dampen spirits, and the group predicts an increase in oil demand in 2014, that will be “more than offset by the projected increase in non-OPEC supply.” Nevertheless, OPEC will “maintain the current production level of 30.0 million barrels a day.”

The U.S. Energy Information Administration (0r, EIA) last released estimates in November, as part of its short-term forecasting. EIA predicted then that in 2014, WTI crude was going to fall to $95 per barrel, and Brent to $103 per barrel, lower than the Deutsche Bank predictions. The NYMEX West Texas Intermediate Crude Oil Price for January closed Monday at $97.34 per barrel. For the same period, Brent crude oil on the New York Mercantile Exchange closed at $108.29 per barrel.

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