(John Kemp is a Reuters market analyst. The views expressed are
By John Kemp
LONDON Jan 26 EU sanctions on Iran's oil
exports and fears about disrupted supply lines may not have made
bullish oil analysts more confident since the start of the year,
but they have forced bears with below price average forecasts to
scale back their estimate of downside risk.
Seven analysts have made significant changes to their
forecasts for average Brent crude prices in 2012 in January
compared with December, according to an analysis of the latest
oil price poll published by Reuters.
Six analysts raised the predictions by $5 per barrel or
more, while one cut their forecast by $8. Every one of the
analysts raising their forecasts this month had previously been
significantly below the median in the December poll, while the
lone analyst to cut their prediction had been significantly
The result is that forecast clustering has intensified. The
standard deviation among institutions surveyed in November and
January was around $9.25, falling to $7.50 in the January poll.
Pressure to stick close to the consensus remains fierce, but
so far it is analysts with the more bearish forecasts who have
been forced to come into line, while bulls stick with their
earlier numbers (here).
Forecast clustering to this degree looks incongruous. The
average change in annual Brent futures price from one year to
the next since 1990 has been 23 percent. Market forecasts are
converging on $107 in 2012, which is less than 4 percent away
from the $111 average in 2011. So much price stability from one
year to the next would be unusual.
Clustering may be an inevitable consequence of competitive
pressure on analysts (it's better to be wrong in company than on
your own), as well as the unusual lack of volatility in oil
markets at present and range-bound trading inside a tight
$105-115 band which has not seriously been challenged since
In the absence of a dominant narrative, most analysts seem
as uncertain about when and which way prices will break as the
rest of the market, and are therefore predicting no change.