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Oil markets risk rapid repricing – Part 1

Since 1900, as the chart shows, oil prices have never been so high for so long as now. Until 2003, they had only been above $30/bbl for 4 years between 1979-1982, during the OPEC production cuts in the Iran crisis. But since 2004, they have been continuously above this level. The reason is the misguided […]

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Japan’s liquidity programme sends oil, gold prices tumbling

Brent crude oil prices have now dropped $20/bbl since their February peak at $119/bbl. The major drop has occurred this month, following the Bank of Japan’s decision to introduce its own massive liquidity programme. This confirms the blog’s long-standing argument that the fundamentals of supply/demand had nothing to do with oil’s rise from $30/bbl to […]

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“Surplus oil is filling inventories worldwide” – Reuters

Have you ever wondered, as you pay your energy bill or fill the fuel tank in your vehicle, just why oil prices have risen so much on the past decade? The question occurred to the blog when reading a Reuters report of the latest Outlook from the International Energy Agency (IEA). It notes the IEA […]

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Crude oil’s slide puts markets under pressure

Crude oil markets long ago lost their role of price discovery. Since early 2009, they have instead been dominated by pension funds seeking to find a ‘store of value’ as the US$ weakened, along with hedge funds enjoying a money-making ‘momentum play‘. The reason has been the $tns spent by western central banks in their […]

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“Its the oil price, stupid!”

Famously, when Bill Clinton ran his successful presidential campaign in 1992, his advisers would remind him of the key message with just one phrase “Its the economy, stupid!”. Today’s policymakers would do well to maintain a similar focus on the oil price, if they want to understand today’s lack of demand. Somehow, everyone seems to […]

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Fed liquidity boosts oil prices as fundamentals weaken

Oil prices long ago moved away from the fundamentals, as the US Federal Reserve targeted asset price bubbles in a misguided effort to magic up consumption gains. Thus we have to focus on sentiment indicators, as in the chart above, to anticipate likely developments: • Monthly US oil inventories hit a new record for November […]

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Cracks appear in crude oil pricing

Crude oil and the major commodity markets have been a “fool’s paradise” in the past 4 years, created by the arrival of the central banks’ massive liquidity programmes. Pension funds rushed to buy, in the belief they would be a “store of value”. Hedge funds followed them as a momentum play, encouraged by analyst reports […]

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Oil prices at record level for 2nd successive year

Crude oil prices remained at a record level for the second year running in 2012. As the chart shows, Brent prices averaged $112/bbl versus $111/bbl in 2011 (blue line). By comparison, 2008 averaged $97/bbl, or $102 if adjusted for inflation (red): • 2008 still holds the record for the highest-ever daily price at $144/bbl on […]

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High oil prices present recession risk

Oil prices are heading for a second successive year of record annual prices. Last year, Brent averaged $111/bbl and it is averaging similar levels so far in 2012. History suggests this is very bad news for consumers, for companies and for the global economy. The reason is that consumers in most major economies are now […]

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Chemical industry operating rates fall as oil prices rise

The battle between the major central banks and the fundamentals of supply/demand is starting resemble the battlefields of the 1st World War. The generals running the campaign believe (with the exception of the Bank of Japan) that today’s crisis is simply due to a lack of liquidity. They ignore the impact of demographics and the […]

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