The bank announced last week that it had further cut its forecasts for crude oil prices, expecting Brent to average $90/bbl in the fourth quarter 2014 and $101/bbl next year.
NAB said its forecasts for Australian retail fuel prices showed underlying growth in line with a lower trending Australian dollar.
It noted global crude oil prices continued to fall sharply amid ample supply and weak demand expectations, combined with discounting of Saudi oil and a broad confidence that the US shale boom was set to continue.
NAB said Brent averaged $87.58/bbl in October, down 10.5% for the month, while Tapis fell to $90.09/bbl. West Texas Intermediate (WTI) also declined, but at a slightly slower rate than Brent or Tapis, falling 9.7% to average $84.40/barrel in September.
Brent ended October trading at $84.45/bbl, NAB said, with Tapis at US$86.82/barrel and WTI at $80.53/bbl.
"Global liquid fuel supply has continued to increase, standing at 92.69 million barrels per day for September, up 2.7% from the same time in 2013," the bank said, with growth being led by increased non-OPEC production, in particular from the US.
"In contrast to ample supplies, liquid fuel demand has been subdued for the last several months, reflected in higher inventories and lower refinery runs.
"Slowing economic growth in China, coupled with weakness in Japan and ongoing malaise in much of Europe, continue to push expectations of demand lower, despite some optimism returning to the US, UK and India."
However, NAB warned that these subdued prices were "likely to be fleeting", because when LNG export started next year eastern Australia would be exposed to netback world parity prices - an issue being fought by unions and end users like Alcoa, which have joined the push for government to start reserving gas, like Western Australia.
NAB said this exposure was likely to see higher local prices, already reflected in reports that new long term supply contracts are being written in the order of $A9/GJ.
The bank noted that international prices were mixed in October, with US gas at Henry Hub steady, averaging $US3.77/MMbtu for the month despite indications that the northeast US could face another cold winter.
European prices were up with the British national balancing point (NBP) rising 2.3% to average $8.09 for October.
"NBP prices had fallen for much of the first half of 2014 on the back high inventories following a much milder than average 2014-15 winter. Japanese LNG prices were up 2.4% to $17.77/MMbtu," the bank said.
"Overall, our natural gas forecasts for Q4 2014 are slightly lower than our previous forecast for Henry Hub ($4/MMbtu) and slightly higher for Japan LNG ($16/MMbtu).
"In the medium term, we expect there to be downward pressure on international prices as new LNG export capacity from Australian and elsewhere boosts supply."
