Brent Crude Price May Fall This Year

Brent Crude is expected to average 105 dollars per barrel in 2012 lower than 2011’s 111 dollars on worries about the impact of the euro zone on economic growth, said Reuters poll.

It rose above 109 dollars a barrel late December as China’s manufacturing activity expanded slightly, lifting hopes of higher oil demand and as rising tentions between Iran  and the West created supply disruption fears.

Crude had been one of the best performers among commodities in 2011 with Brent posting a annual gain of 13 percent to a record average of nearly 111 dollars a barrel as unrest in North Africa and the Middle East disrupted supply.

Brent crude rose from 1.47 to 108.85 dollars a barrel on the first day of trading for this year as the U.S. crude futures climbed 1.97 dollars to 100.80 dollars a barrel after hitting an intraday high of 100.91 dollars.

An oil consultant at Purvin and Gertz, Victor Shum said over the next few months, it will be a balance of economic issues in Europe and the US versus bullish geopolitical factors and the reality of economic growth in major Asian economies.

“Oil in 2012 will see a continuing strengthening trend as there are more upside risks”, Shum hinted, adding that he expected Brent to average 110 dollars and US crude 105 dollars a barrel this year.

In China, activity at big manufacturing firms expanded slightly in December, temporarily putting rest fears that the world’s second-largest economy could slow sharply in the wake of the euro zone crisis and hurt oil demand.

Shum said the expansion in manufacturing data has helped change sentiment in the market on the first day of trading as Iran has flexed its military nuscle as the West moved a step closer toward tougher sanctions over its nuclear programme, ratcheting up concerus of a supply cut from OPEC’s second largest producer.

US President Barack Obama recently signed a law imposing tougher financial sanctions that could for the first time hurt Tehran’s oil exports while the European Union is due to consider similar steps soon.

In retaliation, Iran test-fired two long – range missiles at the end of a 10-day naval exercise in the Gulf while Tehran has warned it could shut the strait of Hormuz, through which 40 percent of world oil is shipped if sanctions were imposed on its crude exports.

Shum noted that a blockage will not be sustainable as Iran would be hurting itself economically, pointing out that the West would commit to maintain oil flows though the strait of hormuz.