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Crude Oil 2013 Outlook

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Demand Growth Slowing

The EIA's prediction of 0.96 mb/d in global demand growth equates to a 1.08% increase and compares to 1.2% growth in 2011 and a 3.0% increase in 2010. The 2000-2007 pre-recession average was 1.6%. The first chart below shows the oil market's response to the overall level of crude oil demand, while the second chart illustrates the effect of the growth rate of demand vs. the y/y change in prices. A regression since 1993 implies that a 1.08% growth rate in 2013 would equate to around a 10.86% increase in oil prices. Given 2012's average through Dec 24th, it would suggest that a gain of $10.22/bbl is possible, which would put WTI at an average of $104.19. That's a bit high in our view, as we expect the global economy to be slower than the 1993-2011 average, and we also anticipate less commodity index investment than what was seen in the 2000's.

Tom is the director of market research for EOXLive, a wholly owned subsidiary of leading independent interdealer broker OTC Global Holdings (OTCGH). At EOXLive he has developed an energy research product focused on finding opportunities and creating trading strategies in the over-the-counter, futures and options markets which is distributed across OTCGH's trading firms and via the web. The product aims to grow the availability of quality information and analysis available to clients through the company's broking/trading platform, EOXLive. Before joining the EOXLive team, Pawlicki spent nearly two decades as a research analyst including, most recently, five years as an energy and precious metals analyst at MF Global. In addition, Pawlicki worked for nearly 12 years as a financial futures technical analyst at REFCO, analyzing Treasury bond, stock index, and currency futures markets from both technical and fundamental perspectives, after spending a brief stint as runner on CBOT Bond Floor for the company. Pawlicki is a graduate from the University of Illinois at Chicago.

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