Publications: Notes at the Margin

What Ails Oil? (December 31, 2018)


2018 will end with Dated Brent trading for around $50 per barrel. The price is twenty-four percent below the end-2017 price and forty-one percent below the 2018 peak of $86.15. It is also below the consensus forecasts published by Consensus Economics. The thirty or so organizations surveyed for the firm’s December 2017 Energy and Metals Consensus Forecasts saw Brent averaging $59 per barrel in December 2018. Our projection was $10 higher. Only one organization, Macquarie, came close. However, it also saw prices at $48 in June when the actual price was more than $70. As Nobel laureate Nils Bohr once noted, "Prediction is very difficult, especially if it’s about the future."


Today, the forecasters are not current with the oil market's changing structure. They are, instead, effectively trying to fit buggy whips onto Formula 1 race cars instead of the Pirelli Pink Hypersoft® tires introduced for the 2019 season. Their cars will go nowhere.


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