With all the fanfare about the Iran Nuclear Deal being agreed I would expect barrel loads of surplus oil coming onto the market in 3 - 6 months. In this scenario I would have half expected to see the oil markets in backwardation but they are not, so I just wonder if this hasn't already been priced in.

I expect the price of oil to be a big rollercoaster for the next two years. There are powerful cross-currents.

Great article indeed. I have bracketed the $43 to $54 area since a month ago and, considering that the $43 support got broken recently, I lean bearish expecting further declines to $35 or below especially with the Iran deal news now. As for gold, it has reversed already and has been trending up vs. Euro and JPY since some time now while it seems to have also bottomed out on the monthly / weekly charts in terms of US Dollar (pending final confirmation once it trades above $1307).

Depending on how you look at it, the oil trade is in a secular bear market since $147 peak price, but there will be cyclical bull markets in oil until it will be completely substituted by Thorium based nuclear energy over the next 20-30 years.

The world has 40-50 years of proven reserves at the current global consumption rates and trends. However, very little amount of oil can be actually produced below $50 pbb sustainably. Oil should be trading above $75-80 pbb by 2018, still far away from $147, but the oil prices should continue to climb over the next 20-25 years as the supply below $80-90 pbb including the fracking is limited to only a few years.

Select producers in Middle East can produce oil as low as $35-40 pbb today, but their economies heavily depend on oil and actual cost to run their economies is above $65-70 pbb (most of them are around $80-90). These countries cannot make massive cuts now, they may continue to sell at a discount to keep their market share, but the deficits will eventually cause economic and social instability.

The oil as a viable energy source creates a tough environment over $80 for the world economies and below $80 for the producers. I suppose it will slowly converge to $80-90 over the next few years, but the oil will be substituted and abandoned like the whale oil of late 1800s as it tries to break out above it...

If we factor 2-2.5% annual inflation, the world may support the oil prices around $120-130 in 20 years (from $80 balance point). We should see peak oil within 25-30 years in economic terms because all alternative energy sources will be largely substituted by Thorium based nuclear energy at (massively) cheaper rates.

It is not an issue of using up all of the oil reserves (we didn't run out of whales to abandon it), it is an issue of price and the significantly better alternatives at higher prices. I do not believe the global economy will be sustainable over $120 pbb as even the largest supplies over $120-130 pbb worldwide (Venezuela etc) won't last more than 10 years.

It appears by most metrics, the oil is trading at the cheap end at these prices, but also massively expensive for a long term energy proposition over $80. I think we will see $45-75 range traded for a few years.

I agree with your roller coaster take for the price of oil in the near term. However, our analysis still finds it at the cheaper end although given the monthly downward momentum, the rallies will be mostly sold in 2015 ahead of hammering a low. I would not count on a V-shaped bottom in oil...

linkedin really has good members. I love the commentary. It is intelligent, and well informed.

Thank you. Bert

Well written and very informative. I think green energy is going to become more important a we go forward http://j.mp/AtForexCentral

A short note Shelley, the green energy (solar, wind etc) do not really replace fossil fuels though, they don't reduce the price of energy. Instead, they simply become viable alternatives from pricing point of view. I think in the long run, the cheaper nuclear energy (by a factor of 10) is a better strategy, especially Thorium without the proliferation risk and nuclear waste. Ultimately, we don't even need any of the fossil fuels and such a transformation of the current energy pipeline (including synthetic fuels) would create more jobs than just new drilling... https://youtu.be/k6BXvw6mxtw

Shelley: green energy has to be defined. If it is micro-algae, I have serious doubts. If it is solar, you bet. Even in high school I said solar would someday be a great source of energy as efficiency increased with advancement of technology.

In the meantime, there is an abundance of natural gas. The world has about 1000 year of known reserves of gas. That's enough for my lifetime, and 10 more like it.

Bert, by 2030, the gasoline or other fossil fuel cars may become the 21st century equivalent of horse carriages. The cost of batteries are falling so fast that by early 2020s, owning a gas vehicle may simply cost roughly the same as owning an electric car for their entire lifetime. So, even if there will be gas cars still around, the change in the infrastructure toward natural gas should never happen due to the rising efficiency of electric cars and dropping price of solar energy. Hence, the whole focus will be about cheaper electricity. Eventually people will find out that 200x more efficient and cheaper nuclear power will also far outweigh the solar panels that are expensive to maintain. The pivotal moment will be about the transformation from gas to electric cars for consumers, then the race will be naturally about lowering the cost of electricity. I would prefer paying more for solar to coal and natural gas due to the environmental reasons. Nevertheless, Thorium (but not Uranium) based nuclear energy would beat solar power easily, but it has to be a govt driven effort, at least in the beginning...

This discussion does not reflect the demand for oil in the production of petrochemicals used to manufacture synthetic fibers, plastics, and other polymerized petroleum products.

If we experience declining cotton yields over the next few years, oil and liquified natural gas prices could rise very rapidly - not unlike 1973-1980.