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BofA Cuts Brent Oil Price Estimates on China Demand, U.S. Crude

Bank of America Corp. cut its Brent crude price estimates amid lower-than-expected fuel demand in China and Europe and rising oil production in North America.

Brent, the benchmark for more than half the world’s oil, will trade at an average $103 a barrel in the second half of this year, according to Francisco Blanch, the bank’s head of commodities research in New York, lowering the bank’s forecast from $111. The 2014 Brent estimate was cut to $105 from $112, he wrote in a report dated yesterday.

“The combination of lower demand and higher supply could tilt the market into a small surplus over the next 18-to-24 months,” Blanch said.

Bank of America left its estimates for West Texas Intermediate unchanged at $91 a barrel for the second half of 2013 and $92 for 2014. Front-month Brent futures traded at about $103.89 at 12:17 p.m. London time. WTI was at $94.41.

The bank reduced its 2013 global oil-demand growth estimate to 800,000 barrels a day from 950,000 barrels because of weaker-than expected consumption in China and Europe. The 2014 growth forecast was cut down to 1.2 million, mostly due to expectations for slower growth in emerging markets. U.S. output has exceeded “optimistic” estimates by as much as 500,000 barrels a day in the fourth quarter of 2012 and the first three months of this year amid rising shale oil production, Blanch said.

“Unless regulatory constraints to export crude oil are removed, WTI crude prices should remain soft, and we still see a risk of $50 a barrel for the Oklahoma grade at some point over the next 24 months on the back of midstream and downstream bottlenecks,” the bank said.

There is a growing possibility that Brent will move into a range of $90-$100 a barrel after 2014 as “we now see less of a structural oil market deficit on softer emerging market activity and the rise in non-conventional oil supplies,” according to the report.

To contact the reporter on this story: Konstantin Rozhnov in London at krozhnov@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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