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Brace for huge oil volatility


Oil prices are likely to be extremely volatile in the next few years, driven by supply constraints rather than demand as financing for new production evaporates in favour of renewables, U.S.-based Castleton Commodities International said.

“You could see spikes to even higher than $100 a barrel, even $130, and you could also see it go down to $35 a barrel for periods of time going forward,” William Reed II, CEO of Castleton, told the FT Global Commodities Summit. “The question is what happens first. Peak demand or peak investment?”

His comments echo those of European rivals who see a return to $100 per barrel oil as a real possibility. read more Oil has not been above $100 or even $90 a barrel since a sharp downturn in 2014 when the rise of U.S. shale oil convulsed global markets.

Reed said an immediate decarbonisation of the world was risky and not possible. He sees Castleton continuing to focus on natural gas and power markets as demand for these will rise with the energy transition. Picking new investments has become more of a challenge in terms of making sure they meet the returns hurdle and do not become stranded in the transition.

Reed sees a longer term role for natural gas for heating and electrification, adding that Castleton was looking to reduce the carbon footprint of its natural gas with investments in hydrogen and a carbon capture pipeline.

He said the oil price rebound was not linked to a broader super cycle as it moves around the $70 a barrel mark.

Metals like copper and aluminium recently hit multi-year highs and new infrastructure needs to meet power demands in the energy transition are set to spur even higher prices.

“You’re seeing a recovery from COVID … These (oil) prices of $60 or $70 (a barrel) are not that shocking. We’ve been in that neighbourhood for quite a while, that’s quite middle of the road,” he said.

He expects demand to be largely back to pre-COVID levels by the end of this year, depending on the oil product, the risk of COVID variants and emerging market access to vaccines.


6 Comments on "Brace for huge oil volatility"

  1. Outcast_Searcher on Sat, 19th Jun 2021 2:11 pm 


    Looking at a long term WTI chart, WHEN have crude prices NOT been volatile (over a few year timeframe) since, say, June 1973.

    (And they were volatile before that, just less wildly volatile).

    And yeah, rising demand will tend to rising prices, so no surprise re the trend since since last spring’s panic selloff as Covid-19 and shutdowns took hold on the globe.

  2. makati1 on Sat, 19th Jun 2021 4:19 pm 

    Outcast, you are correct. I ignore oil prices as they will be all over the chart. I know that what goes up will come down. High prices mean fewer buyers and less profit.

    But then oil is sold at way below its true value. That is why we burn too much. How much prime steak would you eat if it was only 25 cents a pound? Or Chivas Regal, 25 year old scotch, was $1 per gallon? LOL

  3. ANAL REAPER on Sat, 19th Jun 2021 7:06 pm 


  4. Outcast_Searcher on Mon, 21st Jun 2021 1:44 pm 

    Makati1: Yet, OTOH, the market is a far better determinant of what a commmodity (or any product) is worth, than random opinions from the peanut gallery.

    What is crude’s “true value” in a decade, if PHEV’s and BEV’s completely dominate car sales in the first world, for example?

    There is certainly downside risk, although I think the transition will be FAR less rapid than the “super green” folks like to claim, while they try to pump TSLA.

    For one thing, given its lack of infrastructure, which will tend to continue, it will take DECADES longer for the third world to fully support a high proportion of BEV transport than will be likely for the first world –presuming cost and battery improvements move the market very strongly toward BEV’s in the first world by, say, 2035.

    Either way, it’s clear no one can reliably predict what oil prices “should” be. If they could, then exploiting the volatility with options, they could literally acquire wealth that would make Bill Gates look poor over time, given the potential profits from reliably being “right” re short term market direction on crude.

  5. makati1 on Mon, 21st Jun 2021 4:46 pm 

    Outcast, the “Market” suckers are brainwashed by the corporations that own them, you included, it seems. I don’t gamble in the market, and never did, so I don’t care if it fails today. In fact, I hope it does. DOW <10,000 would be a more realistic value.

    A gallon of gasoline will take an average car about 20 miles. How many men would it take to push that same car those 20 miles and how long? What would that cost in dollars for labor? THAT is the true worth of oil, not the cheap throwaway price we have enjoyed.

    But, I suspect we will soon pay the true price. The loss of everyth9ng that depends on cheap oil, including our cushy lifestyle. I have moved away from that scenario. The Philippines uses 1/20 the amount of oil, per capita, than Amerikans use. My lifestyle will not change much. ^_^

  6. pat on Thu, 24th Jun 2021 5:53 pm 

    The Oil is going to break all previous high of $147.27 (July 2008) to new record of $200. World beging see OIL SHORTAGES. prepare

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