BNP Paribas sharply raises oil price forecast

BNP Paribas sharply raises oil price forecast

The bank said it expected U.S. crude to average $105 a barrel.

February 24, 2011 12:24 by Reuters

BNP Paribas sharply raised its oil price forecast on Thursday as growing concern over violent unrest in Libya spreading to other parts of the Middle East sent futures prices spiralling higher.

The bank said it expected U.S. crude to average $105 a barrel and Brent to average $117 a barrel in the second quarter of 2011. It said any OPEC output increase or release of IEA’s strategic inventories would take time to reach the market.

“The geographic scope of popular upheavals is perceived by the market to potentially extend to neighbouring countries such as Algeria, and some speculate ultimately Saudi Arabia which holds the bulk of OPEC’s spare production capacity,” said Harry Tchilinguirian, head of Commodity Markets Strategy.

“When you start adding the potential number of barrels at stake, you can see why the market is tense and would rather be long oil than short.”

(Reporting by Nia Williams)