Barclays doubts further drop in current crude oil prices

Barclays projects that oil prices won’t nosedive since it settled at $100 per barrel. It said that a further drop below this level is unlikely to happen based on third quarter balance figures and demand coming from countries within the Organization for Economic Cooperation and Development (OECD).

Outcomes of events happening mid-June will have the next major impact on crude oil prices.  The national elections in Greece, negotiations between the West and Iran regarding the latter’s nuclear program, as well as a pending OPEC meeting could affect movements in oil prices.

Barclays disclosed, however, that oil markets would not have a definite course until after these events have taken place. OPEC says it prefers to monitor results in the meantime, but could initiate action if circumstances warrant it.

Barclays noted that “Despite OPEC policy being on hold for at least another few weeks, we detect no particular urgency in the market to take Saudi Arabia on and test the full extent of the downside.”

The public believes that Saudi Arabia is very much aware of the fact that its oil production is already beyond stable levels. Moreover, it would be easy to release 1 million bpd of oil if needed.

There is also a general perception that third quarter balances are healthy enough and would remain so, despite high oil production by OPEC.

Barclays stated that possible crude oil withdrawals from OPEC may reach 1.8 million bpd more for the third quarter compared with that in the first quarter. The United States EIA agrees with this estimate.  OPEC’s estimates are lower by 0.2 million bpd, while IEA cut Barclays 1.8 million estimate by half, to 0.9 million bpd.

As a whole, the 2012 balances have been relatively healthy.  Despite a $14 plunge in the crude oil price per barrel a month ago, a series of declines will be quite farfetched due to the healthy third quarter balance expectation.