NBAD projects oil price rebound as demand grows

National Bank of Abu Dhabi is forecasting that oil could rebound this year, reaching as high as $45 per barrel as low crude prices revive demand from traditional guzzlers such as China.

The bank’s forecast for the price of West Texas Intermediate (WTI) crude contrasts with Friday’s close of $29.64.

Still it is not as if NBAD is projecting an unfettered rise.

It said yesterday that, as the global oil glut should last into 2017, WTI this year should have a trading range of $25 to $45, “although a very brief spike down towards $20 is possible”.

Claude-Henri Chavanon, head of global asset management at NBAD, said in its annual investment outlook: “Oil demand has been growing steadily, and this should remain, helped by lower prices”.

World consumption is to increase to 95.1 million barrels this year from 93.7 million barrels in 2015, while total world production is expected to increase to 95.9 million barrels from 95.7 million barrels in the same period, NBAD said, citing the US Energy Information Administration.

Revenue from oil makes up 65 per cent of the country’s regional government inflows.

Amid the 70 per cent drop in the price of oil since its peak in 2014, the UAE and Qatar have been among the most resilient in terms of budget shortfalls in the region, with the deficit in the Emirates expect to improve to 4 per cent of GDP this year compared to an estimated 5.47 per cent last year.

NBAD noted that GCC countries are estimated to have sold off about $210 billion of their $3 trillion in net foreign assets in 2015 and are expected to liquidate $180bn more this year.

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