Precios del petróleo subirán

September 24, 2012

London Sees Oil Prices on the Rise by Dr. Kent Moors

Dear Oil and Energy Investor,

My latest trip to London may have centered on the briefings I gave on Iranian oil sanctions, but I also did a number of media appearances.

As I have mentioned before, questions from European interviewers are generally more knowledgeable and to the point than in the states. This may be because places like London are closer to the events directly affecting the price of oil.

Or it may simply be a result of recent history.

Each of the major events that have determined oil price fluctuations in the past two years (Egyptian unrest, Libyan civil war, bank credit squeeze, euro valuation, Iranian oil embargo) have either been of European origin or have affected Brent prices set in London almost immediately.

The better questions asked here may simply be a function of having less time to deal with matters in the abstract. Events have direct consequences here, and the market has less leverage to overlook them.

So it was hardly unexpected that I would be asked explicit questions requiring focused answers.

However, there was a surprising element. Nobody - be he/she a commentator, journalist, analyst, or expert - expected a fall in oil prices. The entire market environment in Europe is looking in the other direction.

The "high point" in an American interview is usually when somebody asks me where I think the price of oil or gasoline is going. In London, the matter also came up. However, my predictions of $130 a barrel for Brent and $115 for WTI (West Texas Intermediate, the benchmark crude traded on the NYMEX) by the end of 2012 were considered on the low side.

My further suggestion of $150 for Brent and $130 for WTI by the end of 2013 have caused some disagreement in the states, but are par for the course averages for what people are saying over here.

The overwhelming consensus in Europe is that oil will rise, absent exogenous economic or financial problems. In other words, the price can go down, but such a move would be a result of another bout with credit crises, intra-bank problems, or currency weakening.

In such situations, the lowering of oil prices has nothing to do with oil, or its supply/demand balance, or its trade. Rather, economic constriction results in concerns over short and medium-term demand and those translate into a lower price.

Left on its own, the consensus over here is simple. Oil goes up.