EXPERT INTERVIEW: oil continues falling on world trade floors

/IRBIS, Dinara Mukasheva, August 28, 2008/ - Since the beginning of August oil decreased by 7.9 %. During this period quotations fell to $112 per barrel. At that, majority of analysts forecast quotation growth to $200 per barrel in May. On the current week IAFM IRBIS interviewed experts on factors of strong volatility on the market and forecast evaluation of oil quotation level by the end of the current year. Majority of analysts consider that oil will fall due to world economy recession. Volatility on oil market experts connect with a big stake of speculative interest and its inconstancy. At that, experts refer to reducing of oil products usage in USA, Japan and China, decreasing of GDP of Eurounion in the second quarter since euro first circulation in 1999, GDP of Japan by 2.4 % (max. fall for the recent 7 years). USD rate decreasing relative to world currencies, geopolitical risks, connected with Iran, Iraq, Nigeria, problems with supply due to natural disasters; these factors, according to analysts, will correct falling. Azamat Eskozha, financial analyst of Investment and Finance Management Department of RESMI FIH JSC suggests that speculative component, heated by expectations of energy resources demand decreasing on oil market played the big part. "Majority of analysts consider that $100- level is a strong support level and when falling will stop, the new growth will start, which can even exceed the previous one. So, August 21 market showed readiness for growth, which quotation reached $122 after sharp oil reserves decreasing in USA and tense relations of Russia and world community" - Mr. Eskozha thinks. Nurlan Rakhimbaev, the head of branch analytics department of Subsidiary organization of Joint Stock Company BTA Bank BTA Securities JSC also considers that world economy recession is an acute factor for further falling till 2012 - 2013. At that, he is more skeptics and thinks that price fall will be rather deep - to $75.5 per barrel. However, Mr. Rakhimbaev expects no increasing of geopolitical tension: "In particular, we forecast decreasing of temperature in relations between West and Iran as Iran's treasure with its oil and gas reserves and geographic situation grew for western consumers of hydrocarbons due to recent events in Georgia, through which territory three oil pipes run". Expert also says that speculative factors are weakening on the market. Sapar Baymahanov, financial analyst of Tengri Finance JSC thinks possible that investors` reaction on economy recession and high rates of inflation in USA and Eurozone countries in the second quarter can reduce demand on hydrocarbons in mid-term prospect, especially its speculative component. Shakhnazar Tleuliev, analyst of Asia Broker Services JSC saw angularly to the problem, supposing that oil price dynamic till the end of 2008 will mostly depend on results of negotiations Russia - NATO and relations between Russia and USA. In case of conflict escalation, analyst forecast price growth by more than $147.27 per barrel. At that, Mr. Tleuliev still thinks that quotation may fall: "But if we not consider political conflicts, than oil must decrease. And major reasons certainly are dollar appreciation and inflation decreasing in USA, which was announced by the head of FRS Ben Bernarke last week. Position of Dominic Lyuenz, analyst of oil sector of Visor Capital JSC is neutral. He as well as other experts names the reason of price fall - stock- jobbing around global demand. However, the last week showed oil growth, aroused by USD appreciation and anxieties on fail-safety deliveries because of conflict in Southern Ossetia. His forecast is within the current price range: "Today, consensus is reached on Brent oil, which should finish the year at $123 per barrel". Zhanar Zhakupova, expert of BTA Analytics also determines the price within the current ranges. At that, Mrs. Zhakupova sees no fundamental reasons for such high oil prices, supposing that after 2 times price growth for the last 12 months, oil prices are likely to enter consolidation stage. However, according to her, USD rate growth and reducing of fuel consumption by transport and industry sectors in developed countries are the temporary factors, as permanent growth of consumption in Asian and Pacific regions is the driving energy of price growth. "Considering that August mid price for a year made $113.8 per barrel and OPEK intentions to reduce oil production for prevention of oil fall lower $100 per barrel, according to our estimation, the price level as of the end of 2008 remained on the same level" - expert of BTA Analytics considers. Some experts expressed the opposite viewpoint, according to which, high oil prices have their fundamental ground. For example, Maulen Usenov, analyst of BCC Invest JSC - Subsidiary of Bank CeterCredit JSC thinks that growth of oil production can't follow the growing level of oil products consumption. At that, analyst remarks to the big stake of speculative factor in pricing: "We are sure that fundamental reasons move up oil when the market adds its speculative component, which condition the current volatility. Our forecast on oil is $110 per barrel by the end of the year and the market will determine its extra charges". Information is presented within the frames of weekly expert interview on acute questions of Kazakhstan and international stock market development, made by IAFM IRBIS. Analysts of Tengri Finance JSC, BTA Analytics JSC, RESMI Finance & Investment House JSC, Subsidiary organization of joint stock company BTA Bank BTA Securities JSC, Asia Broker Services JSC, Visor Capital JSC, BCC Invest - Subsidiary of Bank CenterCredit JSC participated in interview. IAFM IRBIS expresses its gratitude for participation in this project. For detailed information please contact us Tel.: (727) 237 53 41 [2008-08-28]