We already mentioned Societe Generale’s analysts suggesting Brent crude prices rising to between $125 and $150/barrel in the aftermath of a US-led Syrian surgical strike. The financial headlines are already flagging new 2013 highs of $115/barrel but we should remind readers that at the beginning of the year the analyst community was forecasting an average price of $115/barrel. No doubt in those forecasts there was allowance for US/Israel/Iran tensions but it has taken the largest chemical weapons usage in decades to push the price towards just the average forecast…..
As regular WealthiFi readers will know we believed those early year forecasts were a bit optimistic given the shale supply revolution in the US. It strikes us that the price action to date on a brand new escalatory event in the Middle-East is relatively subdued in the context of original forecasts and perhaps is further evidence of the major shift in supply dynamics in the energy markets.
The recent flurry of asset sales(Statoil/OMV) and asset write downs(Royal Dutch Shell) are a possible reflection of reduced pricing/returns expectations and one worries that a potential temporary spike in crude prices will stall the necessary, in our view, rationalisation of portfolios. Just saying….and watching this chart courtesy of Nasdaq:
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