Bullish on Oil Prices? Two Reasons You Might Change Your Mind

The Energy Report: Marshall, before the Great Recession hit, we appeared to be on target for $150 per barrel ($150/bbl) Brent in mid-2008, and we were hearing forecasts of $200/bbl before the end of that year. But things have changed. I'd really like to get your fix on how you perceive energy markets have been altered over the past five years.

Marshall Adkins: For the oil market specifically, two massive structural changes have occurred since 2008. First, U.S. oil supply from horizontal drilling in tight shale formations has created a reversal of the four decade-long decline we've seen in U.S. oil production. When I say reversal, I'm not just talking a minor blip; I'm talking about erasing a 40-year decline within five years. This truly is a massive structural change to U.S. oil markets.

On top of that, in conjunction with the Great Recession, the world has figured out that there's too much debt, and most of the developed world is going through a deleveraging period. Historically, whenever you deleverage, you get subpar economic growth, and subpar oil demand growth. For the past five years, we've seen significantly lower demand growth for oil compared to the prior two decades. I expect that to continue, and I expect U.S. oil production to continue marching higher. Continue reading "Bullish on Oil Prices? Two Reasons You Might Change Your Mind"

The Case of the Missing 200 Million Barrels of Oil: Marshall Adkins

Supply threats in the Middle East have governments around the world hoarding oil, largely in secret. But it didn't get past Raymond James Director for Energy Research Marshall Adkins, who noticed the 200 million-barrel discrepancy between what was pumped and reported global oil reserves. Where did the missing oil go, and why don't prices reflect this substantial surplus? More importantly, what happens once the reality of an oversupply sets in?—A tough six months, Adkins expects. Read on to find out where you can hide when prices plummet.

The Energy Report: You've written a provocative research report titled "Hello, We'd Like to Report a Missing 200 Million Barrels of Crude." It argues that the global oil inventory should have grown by over 200 million barrels (200 MMbbl) during the first six months of 2012. Where did this oil go? And a better question is, why hasn't this surplus shown up in pricing?

Marshall Adkins: When the U.S., the European Union and the United Nations imposed sanctions against Iran, the world responded by putting oil into storage. China rapidly began filling its strategic petroleum reserves. Saudi Arabia topped off its surface reserves. Iran put oil in the floating tankers. Continue reading "The Case of the Missing 200 Million Barrels of Oil: Marshall Adkins"