Thursday, September 22, 2011

How high/ low will oil go?

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"

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)

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!)

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. Sphere: Related Content

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