Publications: The Petroleum Economics Monthly

Can Crude Markets Resist the Pull of Expectations? (September 2012)


The Petroleum Economics Monthly has advanced the view that world oil markets are following a pattern first exhibited in 1985 and 1986. Back then, as readers will recall, Saudi Arabia lost patience with other producers and introduced a new pricing scheme to recapture lost market share. After the new strategy was revealed, most oil market participants realized prices would collapse, as they ultimately did. However, for more than six months prices increased as intermediary participants scrambled to minimize inventories and their efforts pushed the market into backwardation. Ultimately, though, the greater supply prevailed and prices fell. As noted, our view is that the world is following a similar path today.


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