There was a low-key event in New York last night with several leading energy analysts. I hesitate to write something about it, because I violated every journalistic rule in the book and didn't jot down a single note.
But there seemed to be a fairly widely-held consensus in the room, so passing it on accurately is not particularly challenging.
The event was at the Council for Economic Education, and CNBC energy reporter Sharon Epperson invited many of her on-air guests to participate in an extremely informal roundtable around dinner. The speakers: Addison Armstrong, the director of market research at Tradition Energy; Stephen Schork, editor of The Schork Report; Tim Evans, Energy Analyst at Citi Futures; Anthony Grisanti of GRZ Energy; and Ray Carbone, an options trader with Paramount Options.
What just about everyone said was:
--They have a difficult time understanding how the price of oil is remaining at current levels. It was definitely a bear's night out. But they didn't believe there was anything difficult to fathom with the move upward: financial investors are putting money into this market as an inflation hedge, or getting into an improving market early, or whatever. But it doesn't signal a turn in the fundamentals of supply and demand.
--The conditions that led to last year's high prices were real, and are likely to return. The analysts weren't necessarily sure when they would come back, but they considered the current price environment a change from a new norm; last year was justified.
--They are extremely concerned -- not surprisingly -- by various proposals that they believe would limit trading in the US. Liquidity was praised, and anything that would limit that liquidity -- like position limits -- poses a threat to that liquidity.
--One area of uncertainty: is the current relationship between natural gas and crude, with crude at near record premiums to natural gas, also an aberration? Or has it been altered permanently because of the technology to extract enormous amounts of natural gas from shale formations?
Like most energy analysts tend to agree, that the climb of the Crude Price will be gradual depending on the how the fundamentals of the Gobal Economy improve in the near future. However, as for the price levels which reached the peak during 2008 are unlikely to be reached and may swing between a price band. Much of the price increase of last year was fuelled by Traders with ample money supply and did not reflect the intrinsic rise of the crude oil price caused by Actual Users taking physical delivery of the product. Had the
Trading been linked/restricted to taking physical delivery of the product the phenomenal price levels would not have found their peaks.