No hope lost for crude oil investments: a 2012 forecast for the commodity oil

With Europe always teetering on the brink of a recession, debt crises raging on both side of the Atlantic and Libya’s crude oil production industry looking to make a strong comeback on the commodities market; temptations to act bearish towards crude oil run high. However, to under-bet oil investments may prove to be a risky move.

Even though the outlook for this year has been rather grim, Brent crude oil saw their futures surge to their highest average above $110 per barrel in history, and few of the economists delving into the commodity oil’s progress are projecting a sharp fall for the European benchmark, even those who are forecasting another drastic slowdown in the global economy.

China’s ever-growing demand for the fuel, coupled with surging oil investments stemming from the emerging economies in Europe, Asia and Latin America have been extremely profitable for crude oil in recent years. In addition, falling output from some of the older suppliers of the commodity oil and fragmented production and exporting rates out of some of OPEC’s more politically troubled countries have managed to keep the commodity market more or less tight even throughout this tough year.

With the economy in the U.S. on a slow but steady mend, crude oil futures and oil investments will likely retain their strong positions, at least until the end of winter in the Northern Hemisphere.

While demand for crude oil has been rising at an increasing pace, supplies have fluctuating, as Russia, Libya, Britain, Norway, Nigeria and countless others have had interruptions in their output of the fuel.

There are also additional factors about to come in from the U.S. that will likely keep crude oil investments up in the prolific nation. With the elections coming next year, the Federal Reserve is expected to launch another round of financial easing in an attempt to bolster domestic economy and to even out the jobless rates in the country. The Seaway pipeline project out of Canada is also expected to drastically lower the amount of stockpiles in the U.S. in the second quarter of 2012.

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If crude oil futures do begin to decline on the sector charts, OPEC would likely step up to curb the damage it would do to global demand, just as it did during the peak of the recession in 2008. Saudi Arabia has also proposed to pare down its own production efforts in order to help the market brace for Libya’s full-fledged return to its ranks. This would also play into OPEC’s attempt to trim down production costs as a whole.

It is easy to expect the bottom to drop out from under crude oil investments and crude prices if the debt crisis in the euro zone continues to deteriorate at such a dizzying pace. However, even the grimmest predictions to the amount of damage crude oil would sustain on the commodity index given another recession in the region are fairly high.

By all estimations, only two out of every 35 analysts believe that Brent crude oil prices will dip under $90 per barrel in the coming year, and the average projections seem to suggest that the oil commodity futures will likely hover around the same $106 per barrel mark they occupy right now.

Goldman Sachs, one of the more accurate crude oil price gauges in recent history is predicting a series of sharp rise for the fuel over the next twelve month stretch, which will see the commodity oil surge as high as $125 per barrel on the ICE Futures Exchange.

Despite the fact that outside of the crude oil sector, global economy is being eroded from several sides, inside the actual market the physical market strength has risen and spare capacity has dwindled. It seems that it is only the perpetual anxiety over a macroeconomic meltdown that is keeping crude oil prices and oil investments down at the moment. Once those fears abate, there is nothing keeping either Brent or West Texas Intermediate crude from gaining and holding new ground on their respective commodity markets.