Publications: Notes at the Margin

It Wasn't Supposed to Be This Way (June 12, 2017)


This report begins with a quote from a June 10 Wall Street Journal article headlined "For Oil Investors, Early Faith in a Rally Begins to Wane":


…it wasn't supposed to be this way. At the beginning of the year, analysts said OPEC's agreement to cut production would cause oil supplies to tighten quickly. OPEC and shale producers looked like they had found a way to peacefully coexist after years of battling for market share.


The "wasn’t supposed to be this way' sentiment applies to conditions in the oil market and to other events that have occurred over the last two weeks, including the steadfast refusal of oil markets to move toward backwardation, the flap over Qatar, Theresa May's election defeat, and a tax hike in Kansas. None of these things was supposed to happen, yet they did. We discuss these unexpected occurences and their implications for energy markets.


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