Technical & Fundamental Oil Reports Specialists

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2014. The year oil lost its swagger

Published Monday, January 5th, 2015

Oil, basis Brent, began 2014 at $110.80 bbl amidst concerns that between Libya, Iranian sanctions, Middle East turmoil and chronic problems with supplies from Sudan, Yemen, Syria and Nigeria there could be a price spike that would sabotage global economic recovery. Oil ended the year at $57.33 bbl, a price fall of such magnitude that if sustained will provide a massive stimulant to global growth in 2015. In 2014 oil came out of the closet and revealed itself to be just as vulnerable to the laws of supply and demand as any other product. In particular that, thanks to shale and new drilling techniques, oil has developed a genuine elasticity of supply that has never previously featured.

First a few facts on crude. On an absolute basis front month Brent lost $53.47 bbl (48.26%) last year and WTI $45.15 bbl (45.87%). Rollover gains/losses were negligible on Brent but reached +$6.42 bbl for WTI, reducing the US crude loss for the year to $38.73 (39.35%). The first to second month spread began the year on Brent at + 27cts/bbl and ended it at -88cts/bbl but backwardation on Brent moved above 70cts/bbl in May. The numbers for WTI were -13 cts/bbl and -43 cts/bbl but the beginning and end numbers hide backwardation of +$1 bbl as recently as August. The first to 12 month spread started at +4.91 for Brent and ended the year at -8.75 and for WTI began at + 6.48 and ended at -6.70.

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Posted by David Hufton