Crude Oil Prices

Global oil prices hit their all-time high in 2008 but have drastically reduced thanks to increased production.It is apparent that all the world’s oil producers are effectively operating at full capacity while demand of the product does not compliment the excess supply. In this respect, the prices of oil have been on a downward trend and may hit bottom in the near future if all factors remain constant. For instance, future prices estimations for Brent and WTI are at $113.18 and $98.49 per barrel respectively. As it is at the moment, brent is $13 per barrel lower as compared to its high in March 2012 while WTI is some $9 per barrel lower its 2012 high reached in February. Already there are projections that there will be an oil surplus exceeding seven milliom barrels a day translating that the prices of oill will come down to as low as $70 per barrel or less. With no doubt, further decrease of oil prices will have a negative bearing on oil revenues for those countries that rely on oil for their economies, the likes of Iran.
Forecast for crude oil prices (June 2012 – Dec. 2012)
WTI Light Sweet Crude Oil
Jun 2012: $102. 20
July 2012: $102.38
Aug 2012: $ 101.45
Dec 2012: $100.77
(Pollack, 2012)
Brent Crude Oil
Jun 2012: $110.27
July 2012: $110.06
Aug 2012: $ 109.76
Dec 2012: $108.15

The above projections show that both Brent and WTI expect backwardation for the second half of 2012. Oil in this half is backwardation because ffof the tensions in the middle east, which is a key global oil producer region. It is also believed that further action on the Iran part would significantly increase the prices of oil (Pollack, 2012).
Reference:
Pollack, Sammy. (2012). Crude Oil Term Structure: Winners And Losers. Retrieved from http://seekingalpha.com/article/320476-crude-oil-term-structure-winners-and-losers

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