A Paradigm Shift in Energy Commodity Markets

History is No Longer the Predictor of Future Behaviour

As the price of crude futures reach close to $60/bbl, the question to ask is can it go higher and if so what will be the impact? Industry analyst CERA has issued guidance that it expects oil prices to stay above $50 per barrel for at least the next four quarters and a number of investment banks have made public announcements of price spikes up to and beyond $100 per barrel.

While many have picked out hedge funds and other alternative investors as the culprit behind rising energy prices in general, the truth is that these investors are simply responding to market fundamentals that they perceive as having an impact on future price levels. Indeed, I would argue that it is these investors that have read the market correctly over the last 12 months while the energy industry has not. Why? Because these investors have recognized that, for the time being at least, history is no longer a predictor of the future.

Commodities Now