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Blackstone sees Brent crude at $40 in first half of 2015.

Dubai: Blackstone, the world's biggest money manager, expects Brent crude to continue its slide further to $40 per barrel in the first half, before any recovery to $70 due to demand from emerging markets, its vice-chairman said.

Crude oil plunged to near the keenly-watched $50 a barrel on Tuesday on expectations of a supply glut amid weak world demand, causing equity markets to be tenterhooks.

Oil slumped almost 50 per cent in 2014, the most since the 2008 financial crisis, after the Organisation of Petroleum Exporting Countries resisted calls to cut output as they compete with US producers.

"During the second half of the year, West Texas Intermediate and Brent crude are both above $70, as emerging market demand continues to increase," said 81-year-old Byron Wien, vice-chairman of Blackstone Group in his ten surprises this year. The money manager has more than $300 billion of assets under management.

Falling oil prices have led to a decline in the rouble amid sanctions by the US, and led to budget deficits in Saudi Arabia, the biggest exporter of crude oil and Oman.

Wein mentioned this in his Predictions for Ten Surprises for 2015. Wein started the tradition in 1986 when he was the chief US investment strategist at Morgan Stanley.

Wein was right in his call for a 2014 surge in the Nikkei 225 Stock Average to reach 18,000. The benchmark index for Japanese equities peaked at 17,935.64 in December, according to Bloomberg.

Falling oil prices would have an impact on Iran, which is dependent on its sale of crude to offset the impact of sanctions.

"The economic weakness resulting from the unexpected decline in oil would forces a conciliatory attitude on the part of its nuclear negotiators. Pressure to cease nuclear weapons development comes from the Iranian people as well, as they seek more economic opportunity," said Wien.

Rallying US equities

US equities are expected to perform strongly in 2015, outperforming its world's peers as the world's largest economy increases spending.

"A growing economy, fuelled by housing and capital spending and favourable earnings, enables the Standard & Poor's 500 to increase 15 per cent, outperforming equities in most major industrialised countries throughout the world," Wein said.

The Dow Jones Industrial Average and S&P500 hit record high in late December as the US limped back to normality after the recession.

The US Federal Reserve is expected to raise short-term interest rates, well before the middle of the year, encouraged by the improving employment data and strong GDP growth.

However, the end of monetary accommodation and rising rates precipitate a correction in equities, Wein said.

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Publication:Gulf News (United Arab Emirates)
Date:Jan 7, 2015
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