Publications: Notes at the Margin

Market Testing Forecasts (December 6, 2021)

 

The bulls are running wild. “JP Morgan sees oil prices hitting $125 in 2022, $150/bbl in 2023,” according to Reuters.[1] Not to be outdone, Goldman Sachs’ Jeffrey Currie told investors to “get long oil” because crude has “enormous upside potential.”[2] Other exuberant projections can be found. Those following the petroleum market are pushing crude with all their might.

 

No one is listening. Or, to be more precise, no one is taking the bait. Oil prices have continued to fall. Worse, open interest in oil futures has plummeted. Worse still, investors are not buying the bull story, at least not those who own shares in the BP Prudhoe Bay Royalty Trust (BPT).

 

The bulls could cite many explanations for the present price decreases. We, however, would point to one seemingly antithetical article, an October 26 Financial Times opinion piece by Energy Aspects analyst Amrita Sen. Its title was the perfect oil market killer: “Embrace high fossil fuel prices because they are here to stay.”[3]

 

Dated Brent traded for $86.11 per barrel when the Sen article came out. Six weeks later, Platts reported the price at $71.

 

Sen now joins The Economist’s editors, Dan Yergin, and others as “inverse indicators,” that is, individuals or organizations that make absolute predictions regarding prices only to be proven very wrong very quickly.

 

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