Publications: Notes at the Margin

Brass Knuckles and Price Stability (April 27, 2015)


Price stability may be in sight. Brent at $60 per barrel could become the new normal if one allows for significant fluctuations. A number of factors will play into this norm should it occur. The first contributor will be Saudi Arabia’s use of brass knuckles in its dealings with Kuwait. A second contributor will be the Mexican supply loss caused by the fire in the Bay of Campeche. Third on the list will be cuts made in Canadian capital expansion, which will reduce the nation’s crude output more than one million barrels per day in 2017 from levels projected a year ago. Fourth will be the acquisition of strategic stocks in Asian nations and fifth, increasing use, especially in Asia. Finally, the continued flow of cash into commodities may support further inventory accumulations, adding to the support for current prices. Our report provides the details and discusses the market implications.


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