There's a new oil bull on Wall Street.
Credit Suisse has boosted its 2013 forecast for Brent crude to levels just $15 shy of record peaks, topping other banks like Goldman Sachs and Barclays that had been seen as the most aggressive on the street.
As consumer nations fret about the impact of rising fuel costs on the economy, Jan Stuart, Credit Suisse's head of energy research, predicts the pain could get worse. Demand is proving resilient in the face of high oil prices while supply growth outside of North America has been disappointing.
The bank hiked its Brent forecast by 15 percent to $132.50 a barrel for Brent in 2013, about $12 higher than current levels and within striking distance of record highs over $147 a barrel tipped in 2008, when the economic recession was deepening.
"The story for oil is high, rising prices. Markets are underestimating trend demand growth," Stuart said in a telephone interview with Reuters, shortly after releasing a report that revised his average Brent forecast for 2012 to $125 a barrel from $105, and his 2013 forecast to $132.50 a barrel from $115.
"On the supply side things are not good. With the exception of North America non-OPEC supply is underperforming almost everywhere you look. We've taken more oil offline in Syria, production is down in Yemen, Sudan's 350,000 barrels per day is almost completely shut-in," Stuart said, adding production in the North Sea and Egypt is also creating concern.
And that's before getting to the geopolitical risks posed by the current standoff between Iran and the West. Traders are concerned U.S. and EU sanctions against Tehran -- aimed at halting its nuclear ambitions -- could impact the OPEC nation's exports when they come into effect in July.
Stuart said fears of supply disruption from Iran had encouraged some speculation in the oil price, but he did not believe it had been responsible for driving prices from below $110 at the start of the year to above $128 a barrel in March.
"People look at speculation but behind the paper barrels there has been real physical demand for crude," Stuart said.
"Broadly speaking the global economy is getting better and it's going to get better still."
On Friday Brent crude oil settled at $121.83, up 12 cents on the day but down $1.60 a barrel on the week -- the fourth weekly fall in five.
The average oil price forecast in Reuters latest monthly poll is for Brent to average $115.10 in both 2012 and 2013. The lowest forecast in the 2013 poll was $75 a barrel by Capital Economics in London, almost a $60 below Stuart's call, illustrating the depth of uncertainty in the market.
While high compared to other 2013 predictions, Stuart's forecast is still below Goldman Sachs analyst Arjun Murti's infamous early 2008 call that oil would hit $150-$200 a barrel. It ultimately hit $147 in July of that year, before collapsing to below $40 a barrel in a matter of months, earning Murti, perhaps unfairly, a spot on Foreign Policy magazine's '10 Worst Predictions for 2008'.
Goldman Sachs predicts Brent will average $120 a barrel this year and $130 next, while Barclays Capital predicts $115 and $125 respectively.
THE NEW BULL
Stuart, born in the Netherlands, previously worked for industry publications Petroleum Intelligence Weekly and Oil Market Intelligence after completing a masters at Columbia University's journalism school in New York. Since then he has worked as an analyst with ABN Amro, FIMAT, UBS Securities and Macquarie Group, before joining Credit Suisse in June of last year.
In his latest report Stuart said current supply and demand trends would drive global spare capacity -- which he says exists only in Saudi Arabia -- would fall from already thin levels around 2.4 percent of 2012 global demand of 89.3 million barrels per day to just 1.1 percent by 2014.
"Global supply capacity cannot be expanded fast enough unless key sovereign producers change," Stuart said in the report.
"Only in the longer run can deepwater, non-conventional and re-development lift supply."
The rapid growth in shale oil plays in the United States was a good sign for supply, but he worried it was masking the global trend for production outside the Organization of the Petroleum Exporting Countries (OPEC) to underperform.
Stuart said he saw non-OPEC production growing by just 0.5 percent or 200,000 bpd this year, despite supply growth of around 600,000 bpd in the United States.
Non-OPEC supply is expected to fall by 300,000 bpd in Europe this year and by 200,000 bpd in both Africa and the Middle East, Stuart said.
"Shale growth (globally) may ultimately help rebalance growth with supply," Stuart said, adding: "But not soon, it will take time. It's not going to happen immediately. You would need a macro crisis to break this demand trend."
(Additional reporting By Jeffrey Kerr in New York; Editing by David Gregorio)