Two stories in today's FT characterise the bullish view: "Oil rises back above $112 a barrel after the US government reports a big decline in domestic stocks"
http://link.ft.com/r/S4XZQQ/U1G60H/3K7L/AM75LS/KQRQBC/VU/t?a1=2011&a2=9&a3=22
and "Oil takes tight turn on Libya shortfall: Brent for immediate delivery is trading at a strong premium to forward months, another sign of physical tightness (right now)
http://link.ft.com/r/S4XZQQ/U1G60H/3K7L/AM75LS/8Z4ZSX/VU/t?a1=2011&a2=9&a3=22
Shell's CEO Peter Voser can only say that we are in an era of energy volatility (we have been in this era ever since the first oil crisis!)
http://link.ft.com/r/S4XZQQ/U1G60H/3K7L/AM75LS/U1B1ZM/VU/t?a1=2011&a2=9&a3=22
But the question for the future is: HOW MUCH volatility?
As far as I can see, oil is unlikely to go beyond 110 now, nor below 50 for any extended period. I expect the average price over the next 5 years to be somewhere around 70. Some conservative companies I know are planning on the basis of an average price for 2012 of 85. They may be right, but I expect lower.
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Thursday, September 22, 2011
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