Oil price forecast for Q1 2015

While it is highly unprofessional for any serious energy analyst to speculate about oil prices, it can be justified sometimes. In the end of 2014, Professor Indra Overland, Head of Energy Program at Norwegian Institute of International Affairs (NUPI), asked your humble servant to provide an input for the PRIX Index global survey of politics and oil exports. I was prompted to answer just one question: will the political developments during the coming three months in Russia lead to reduced, increased, or unchanged oil export volumes?

My reply and those of other 188 analysts from the 15 largest non-OECD oil-exporting countries became a basis for an international PRIX Index Q1 2015 that can be very instrumental in oil price forecasting. The idea is as simple as it is ingenious. If the cumulative opinion of analysts around the word boils down to increased export volumes, the prices will likely decline. If experts expect rather a decrease in export from their countries, prices will probably go up.

Now, drum roll please, the experts’ collective mind predicts oil price stabilization at the current level or an insignificant decline during Q1 2015. It follows from the cumulative index number for the first quarter of 2015, which is 52.63, the PRIX Index Q1 2015 states 1. “The range of possible index values is 0-100, where 0 represents a maximal reduction in exports, 100 represents a maximal increase in exports, and 50 represents no change,” Indra Overland explains, “So the value for this quarter is just above the middle of the range.”

In the graph below, you can see the detailed country indices provided to all participated analysts by PRIX.

Libya 22.73
Venezuela 28.57
Nigeria 42.50
Kazakhstan 48.21
Russia 48.39
Algeria 50.00
Kuwait 50.00
Mexico 50.00
Qatar 50.00
Saudi Arabia 56.25
Iran 56.67
Iraq 58.33
The UAE 65.00
Angola 68.75
Oman 75.00

Looks like Oman, Angola and the UAE are going to fight for a bigger market share, while Libya and Venezuala will likely concede their positions, right?

But before you go, here is a short sort-of-a-disclosure.

Fleiss’ kappa

Fleiss’ Kappa shows you the degree of convergence/divergence in analysts’ opinions, which has been estimated for each group of country experts. Fleiss’ kappa ranges from 0 (no agreement) to 1 (total agreement).

Saudi Arabia 0.75
Iraq 0.67
Mexico 0.58
Russia 0.56
Qatar 0.54
Angola 0.46
Libya 0.44
Kuwait 0.42
Oman 0.40
Algeria 0.38
Iran 0.38
UAE 0.36
Kazakhstan 0.35
Venezuela 0.33
Nigeria 0.31

Indra Overland warns us, “If one is to judge from these numbers, Saudi Arabia, Iraq and Mexico are the three countries where there is greatest agreement between the Country Analysts and thus where the situation may be clearest; whereas Nigeria, Venezuela and Kazakhstan are the countries where there is least convergence between the Country Analysts and the situation may be least clear.”

  1. at the PRIX site you will find the rounded index number

P.S.

As you see from the first table, Russian experts tend to think that Russian oil export will slightly decrease in the following 2-3 months. If the plain figure does not fully satisfy you, here is an excerpt from my response to professor Overland:

Oil export volumes in Russia in the coming three months will heavily depend on export taxes and oil price. Export taxes for crude and light petroleum products are expected to sufficiently decrease in January, while the mineral extraction tax (applies to any oil, whether exported or sold on the domestic market) should increase. This combination makes export of oil and light petroleum products more lucrative that the domestic market supply. Chances are, oil companies will stay focused on export in February and March, especially if the global oil price stops plummeting.

Now, what proportion of oil to petroleum products will be exported? Given the investments in refineries’ modernization that were made in 2014 and tax incentives for petroleum products' export that seem a little more attractive than those for oil, export of petrol will probably gain momentum during the next three months, while crude export may stagnate or even shrink.

Russian officials do not expect oil export growth either. As you probably know The Russian Ministry of Energy announced a decline in oil export in 2014 (229.5 mln t versus to 236.5 mln t in 2013) and stated that next year could bring a further reduction down to 224.7 mln t.