Prepare for the Great Inventory Liquidation (Energy Intelligence, 3/3/23)

Oil prices are on a one-way escalator up according to most pundits surveyed during International Energy Week in London. Surging demand in China will lift demand while sanctions imposed on Russian exports will be ineffective. Optimism prevails, but inventories are ignored in the hoopla. Yet more than one commodity price bubble has been broken by inventory liquidation.

Today, rising interest rates, structural change in the oil market and the willingness of consuming nations to intervene in oil markets will likely cause a significant liquidation of stocks over the next year. In the past, such liquidations have been followed by large price declines.

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