Publications: Notes at the Margin

Must Global Stocks Decline before Prices Rise? (February 15, 2016)


Most who follow the global oil market believe world inventories must decrease before a price recovery can be sustained. This report has certainly reflected such a view. Indeed, our econometric model links price changes to stock changes relative to global consumption levels. During the London IP meetings, though, it occurred to us that quantitative easing by central banks may have changed this relationship. This thought leads us to conclude that oil prices could begin increasing quickly once global production drops below world consumption.


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