Crude oil prices may ease in 2014: Expert

David Bloom, Global Head of Foreign Exchange Strategy of HSBC Bank, speaking exclusively to A.E. James, Business Editor of Times of Oman. Photo - Jun Estrada/Times of Oman

Muscat: Crude oil prices in the international market are likely to ease in 2014, mainly due to enhanced supply from two oil rich countries.  

"Demand is reasonably robust, but there are some issues on the supply side and that is why people are little worried about the prices," said David Bloom, Global Head of Foreign Exchange Strategy of HSBC Bank.

He said additional oil supply would come from Syria and Iran, which will push down prices. "Demand is not picking up at the same pace as supply," Bloom added, in an exclusive interview with Times of Oman on Tuesday.

"There is a possibility that the crude price could slip to $90 a barrel, but it is still a comfortable level."
One of the ten key risks for 2014 is a significant fall in oil prices in international markets. 

However, many agencies forecast a baseline price of $100 per barrel, which is very comfortable for the Gulf region.

But he said one of the important questions is whether the oil rich countries are "using the surpluses of the golden period wisely." 

"The oil prices have gone up, the world is looking reasonably good, the crisis of Dubai is behind us and the region is coming back once again, with several countries posting surpluses."

Talking about the fixed exchange rate regime followed by the Gulf countries, he said, "At the moment, nobody wants a single currency. Actually, floating currencies are moving more towards pegs and capital controls."  

Before the global financial crisis, the idea was to make currencies more flexible. Now, people want stability more than anything else.

In the case of GCC countries (which have pegged their currencies against the US dollar), he said the currencies of oil exporting countries would fluctuate in line with the oil prices, if these are not pegged against the dollar. "You cannot have currency move up and down with oil prices. This is the time when they need a solid currency, which is stable, and use the surpluses wisely."

Meanwhile, HSBC Bank on Tuesday said there are ten possible key risks for 2014, which could be negative for the global economy and financial markets. 

Apart from a fall in oil prices, these risks include Fed tapers without a strong recovery, China hard landing and raising the US debt ceiling.


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