Bank raises its forecast for Brent crude this year by 34 percent to an average $110 a barrel
HSBC Holdings said speculative trading may have added $30 a barrel to oil prices last month as a gain in futures holdings by commodities funds outweighed higher production by Saudi Arabia, OPEC’s biggest producer.
An increase in Saudi output starting in November, after New York-traded crude rose above $80 a barrel, failed to stabilize prices even before the loss of production from Libya in the wake of political turmoil in the North African nation, according to a report dated June 1.
“Part of the reason may be speculative activity,” HSBC analysts Sonia Song and Paul Spedding said in the report.
The number of oil futures contracts held by funds has doubled since February 2010 and nearly tripled since September 2009, the analysts said, citing data from the New York Mercantile Exchange.
Based on the correlation between the increase in holdings and the price of oil, the HSBC analysts estimate that speculative activity may have added up to $30 a barrel to prices from October to May.
Crude traded at $99.76 a barrel at 3:45 p.m. Singapore time today in electronic trading on the New York Mercantile Exchange. Price have risen 37 percent the past year.
The Organisation of Petroleum Exporting Countries’ spare capacity, excluding Libya, is around 3.6 million barrels a day currently, HSBC estimated. The increase in production by Saudi Arabia suggests the Middle Eastern nation is seeking lower prices, the analysts said.
“We expect that it is wary of deflating what it sees as a speculative bubble too quickly,” Song and Spedding said in the note.
OPEC will probably maintain production levels when it meets in Vienna on June 8, resisting calls to ease the pressure on the global economy from oil at $100 a barrel, according to a survey of analysts by Bloomberg.
The group won’t announce any supply increase and will keep its formal quota unchanged for an eighth consecutive meeting at the June 8 gathering, said 27 of the 30 analysts surveyed.
OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is outside the quota system.
HSBC also raised its forecast for Brent crude this year by 34 percent to an average $110 a barrel and by 8.4 percent for 2012 to $90 a barrel, according to the report. Brent traded at $114.25 today on the London-based ICE Futures Europe exchange.
Prices may gain on risk of supply curbs in the Middle East and North Africa, HSBC said. Oil has climbed 21 percent in London and 9 percent in New York this year as unrest toppled leaders in Tunisia and Egypt and spread to Libya, Algeria, Bahrain, Iran, Syria and Yemen.