Oil prices seen above $100 through 2013: Reuters poll

By Zaida Espana

LONDON (Reuters) – Oil prices will stay above $100 a barrel through 2013, a Reuters poll showed, as analysts sharply revised forecasts up because of political tensions in the Middle East.

Analysts polled by Reuters lifted the average full-year 2011 Brent forecast up by $12 from the previous month to reach the highest price expectation since the June 2008 poll, the month before oil prices hit all-time highs above $147 a barrel.

“When geopolitics in the Middle East are at play in the oil markets, all conventional bets on the direction of oil prices based on supply and demand fundamentals or economic variables are off,” said Harry Tchilinguirian, BNP Paribas head of commodity markets strategy.

The poll showed Brent averaging $104.57 a barrel this year, up from $92.50 in the February poll. In 2012 prices are forecast at $103.22 and $106.85 for 2013.

U.S. crude oil will average $96.73 in 2011, up from $89.96 in the February poll. In 2012 it is seen at $97.72 a barrel and at $102.94 in 2013.

The Libyan crisis had spurred Brent to a 2-1/2 year high near $120 a barrel on February 24. U.S. light crude settled $105.75 a barrel on March 23.

Despite expectations that the political premium on prices could ebb toward the end of the year, 22 out of the 31 analysts and banks polled by Reuters raised their estimates for 2011. One bank, Societe Generale, said prices could hit $150-$200 if the Middle East implodes.

Analysts agreed the spread of protests across the Middle East and North Africa together with the unfolding tragedy in Japan have made it unusually difficult to forecast prices.

“Attacks led by coalition forces are just the most recent example of such price pressures and may see oil prices test recent highs into $118.42 a barrel and $106.95 in Brent and WTI crude oil, respectively, in the week ahead,” said Daniel Hwang, Gain Capital Forex.com’s senior market strategist.

“Extended declines for oil prices are unlikely, especially considering the upside price pressures from the ongoing turmoil in the MENA region,” he added.

GEOPOLITICAL PREMIUM

A group of Societe Generale analysts led by Michael Wittner estimated that Brent’s current level of around $115 a barrel included a geopolitical risk premium of $15-$20 a barrel.

“In our central scenario, although the unrest in the Middle East and North Africa (MENA) continues to keep the oil markets on edge, there are no further actual supply disruptions outside Libya,” the analysts said.

“This should prevent Brent crude oil prices from trading much above $125 and should allow global economic growth to remain strong over the remainder of 2011,” they added, but warned that unrest in Saudi Arabia could send prices to $150-$200 a barrel.

With relation to Japan, the analysts said incremental demand related to reconstruction and oil-fired power generation had possibly already been priced in for products.

The potentially ephemeral nature of the political price premium will come back to haunt markets later in the year, analysts said.

“As soon as some sort of political stability will be established, the risk premium will vanish and oil prices will go down again,” LBBW’s Frank Schallenberger said.

In addition to the social protest movement spreading in the MENA region, the forthcoming elections in Nigeria in April will also add volatility, according to DNB NOR’s Torbjoern Kjus.

“We do, however, continue to expect regular downward price corrections. The latest six years we have seen two to four such corrections per year; 2011 should be no different, despite increased geopolitical risk,” Kjus said in a note.

“The current geopolitical premium will slowly recede as order is restored in the MENA region,” JBC Energy consultants said. “WTI will remain at a substantial discount to Brent until the Keystone XL pipeline is operational.”

As for the spread between Brent and U.S. light crude, analysts forecast it would average $7.84 a barrel for the whole of 2011.

(Polling by Bangalore Polling Unit; Editing by Dmitry Zhdannikov and Richard Mably and Jane Baird)

Oil prices seen above $100 through 2013: Reuters poll