Oil Prices

[CityFarmer]

One more view on oil price trend, from a local private banker, Bank of Singapore.

The 12-moth price target is US$65 for Brent.

Oil prices near bottom but supply has to fall to lift prices: Bank of Singapore

SINGAPORE (March 25): Conditions are in place for oil prices to bottom out but supply has to be reduced in order for prices to recover, says Bank of Singapore.

While the Organization of the Petroleum Exporting Countries (OPEC) has resisted calls to cut output to boost oil prices, some producers in the US have halted production as lower prices have made it no longer viable to continue operation, Bank of Singapore's chief economist Richard Jerram noted in a report today.

That said, supply may not contract as much as expected as the drilling rigs that have stopped work in the US are the "less productive ones", and improved technology has allowed oil companies to achieve more from existing wells even though fewer new wells are being drilled, he wrote.

"It is clear that the supply adjustment has begun, but rising inventories show that it is still not aggressive enough," he said.

"It could be that a lengthy period of low interest rates has allowed firms to bolster their balance sheets so that they can withstand lower prices for longer than usual, but in the end inefficient producers must exit."

Oil prices have pulled back in recent weeks after a rally in February. Bank of Singapore has a 12-month price target of US$60 a barrel for West Texas Intermediate and US$65 for Brent.
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http://www.theedgemarkets.com/sg/article...-singapore