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CBG07 - Crude Oil Brent (ICE)


The sharp decline in the oil price in response to a changing balance between demand and supply once again demonstrates the danger of extrapolating recent trends when forecasting the future. It is not long ago that “peak oil”, viz. the view that the rate of oil extraction has reached its peak and will decline from then on until oil reserves have been fully depleted, putting upward pressure on prices, was the dominant theme in oil markets.

The prevailing view was also that as far as oil reserves were concerned the low-hanging fruit had been picked and that marginal production costs would keep on increasing as producers were forced to exploit reserves that were more difficult and expensive to reach, for example at very deep sea levels. Brent oil was trading at approximately $150 per barrel at the time and the expectation was that oil prices would remain high. So once again a doomsday scenario regarding the depletion of the resources offered by planet earth has proved to have been adopted prematurely!

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