ZeroHedge: 'The current conditions in the oil market are critical and we could see real oil shortages by this summer if the disruptions to Russian oil supplies persist or even worsen. This would put even more upward pressure on current prices and overall inflation. However, we think an even bigger and more permanent issue has been brewing in oil markets for years and it is finally filtering through to the back end of the forward curve. Longer dated prices have broken out of their 5-year range and have been moving up relentlessly.
'We think the oil markets finally begin to understand that a lack of investments in large oil projects over the past years is threatening supply over the entire next decade, at a time when demand will still be growing as the electrification of the transportation sector will not impact demand meaningfully for years to come. The sharp upward moves in oil prices amidst a broader commodity prices rally have pushed realized inflation and near-term (0-2y) inflation expectations up strongly. But inflation expectations beyond that time horizon have proven to be resilient. So far the back end of the oil curve moved up only $15/bbl. However, we think that once back end prices are moving in a similar fashion to what we currently witness in the front, longer term inflation expectations will likely begin to move up too.'
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