RIYADH: As 2013 begins, oil markets are in for a fall. In some senses, 2012 belonged to a different era. Both Brent and US West Texas Intermediate (WTI) crude oil were above $100 per barrel then, reaching a peak in early March of just over $125 per barrel for Brent and almost $110 per barrel for WTI. Positive economic news leading to stronger oil demand and worries about supply disruptions linked to Iran's nuclear program contributed to firmer prices.

Brent prices had already gained by about 16 per cent in 2011, with New York Mercantile Exchange gasoline prices up about 15.7pc. West Texas Intermediate crude oil rose 7.8pc in the year.

Things have changed since. With the globe entering 2013, market fundamentals are presenting a very different scenario – impacting the energy world in more than one ways. New energy frontiers, have led the world, for the first time in many decades to a real glut like situation. The issue of Peak Oil has been firmly put to the dustbin of history – at least for many years. Shale Gas, Tight Oil, Sand Oil, New frontiers of energy in Brazil, Mexico, off shore drilling, just to name a few, are leading the crude world into a new, distinctly different future.

A “shale revolution” in the US promises to change the market landscape. “US production of shale gas has exploded with a nearly 50pc annual increase between 2007 and 2011,” a report by the US National Intelligence Council noted, while shale oil production, still in its infancy, could bring anywhere from 5 to 15 million barrels per day by 2020 at a break-even price as low as $44 to $68 per barrel.

Consequent to all this, the International Energy Agency in its recent Monthly Report projects that the global oil demand will remain sluggish throughout 2013 as ‘economic expansion remains tepid and oil supply levels comfortable,’ alleviating the upward pressure on crude prices. Although, longer-term oil prices are heading downwards, a price crash in 2013 is unlikely as geopolitical concerns should help support the market, analysts polled by Reuters said. The monthly survey forecasts that North Sea Brent crude oil will average $108 per barrel in 2013, down from an average of $111.71 so far this year.

Goldman Sachs sees Brent averaging $110 next year while Raymond James’ chief economist suggests US-benchmark WTI could fall as low as the mid-$60s, as supply constraints ease across the globe. “We still think Brent crude prices will dip to average $100/bbl in 1Q2012 as fundamentals ease – OPEC producers would need to be cutting production now to have a significant impact on 1Q balances,” UBS strategist Julius Walker wrote in a note to clients.

“We see an easing of oil prices [in 2013] as demand remains weak,” explained Peter Kiernan, lead energy analyst for the Economist Intelligence Unit, adding that even fast-growing emerging markets and non-OECD nations will experience a poor economic performance next year. RBC Capital Markets’ commodities expert, George Gero, sees WTI trading in a $20-band around the mid-$80s in 2013. Barclays oil analysts noted that any significant shift in prices will require either a substantial change in oil-balance fundamentals or significant geopolitical upheaval.

The institution confirmed that it is maintaining its 2013 Brent forecast of $125 per barrel — the same level it has predicted over the past 21 months.

The US Energy Information Administration (EIA) predicts that Brent and WTI crude oil spot prices will average $104 per barrel and $88 per barrel, respectively, in 2013. The WTI discount to Brent crude oil, which averaged $23 per barrel in November 2012, is expected to fall to an average of $11 per barrel by the fourth quarter of 2013.

Markets are in for a fall in 2013, one could say with some degree of confidence.