Publications: Notes at the Margin

Crude Oil Prices: Going Nowhere (July 17, 2023)

Reporters and consultants who follow oil seem certain that the production cuts announced by Saudi Arabia and Russia will push prices higher. Twenty-five years of market history and data contradict their view. The data indicate that oil prices will go nowhere. The key information behind this conclusion is excess returns to storage. Returns to storage convey important market information. Specifically, returns computed today indicate the direction of oil prices in ten to twenty weeks: prices fall when excess returns to storage are positive and rise when they are negative. The more negative or positive the returns, the larger the price increases or decreases.


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