Are you aware that meaningful statistics and information necessary to reasonably predict Oil Prices do not exist?

Most forecasters, whether economists, senior government officials or stock analysts did not predict the doubling over the past year in the price of Crude Oil. This is in part because data required to make reasonable world oil supply/demand predictions and hence reasonable Oil Price predications – world inventories, production, and consumption – either are not available or are not reliable. For example, OPEC continuously implies in its public statements that it can ‘turn the tap on or off at will’. At the same time no solid OPEC reserve estimates are available.

Lack of meaningful data may be a major contributing factor in price swings resulting from data releases that in and of themselves are comparatively meaningless – yet in our view are weighed in the immediate term more heavily than they ought to be. For example, periodically releases of ‘point in time’ US inventories of refined products are actively reported and typically result in what we believe to be short term Oil Price increases and decreases disproportionate with the importance of such inventory fluctuations.

Uncertainty and enhanced risk are bedfellows – something all investors should consider in the contexts of both their investment research and portfolio holdings.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. See Legal Disclaimer.

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