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2024 02 Commodity Update

February 5, 2024
Market Updates

2024 02 Commodity Update

It’s Supply and Demand, Stupid

Energy prices have fallen almost universally, as is evident from the commodity price summary (see document).

Single-issue pressure groups will point towards the “growing irrelevance” of fossil fuels. Of course, this fails to acknowledge that:

  1. pricing is a relative balance between supply; and
  2. energy demand is ~40 – 45% of the global barrel.

We have often spoken of the steps the industry has taken to “shockproof” the supply lines, such that the global market is better integrated than ever.

This impact is seen in relative price stability, but there is a growing concern that the rush to fill in shortfalls in demand has resulted in “forward supply attrition,” where reservoirs are pulled harder to deliver more without the requisite investment.

While this is quick and works in the short term, in the medium to longer term, this can materially shorten the life of a field or demand more significant investment.

Consequently, in the haste to herald the demise of the oil and gas industry citing price, it misses the obvious point that, hitherto, supply has been able to match demand.

They (Single-issue pressure groups) don’t acknowledge that their misguided imposition of a “switch” rather than a transition will have disastrous effects in due course, as supply starts to be outstripped by demand, for which the average consumer will pay the price.

For the first time today, we also publish our Confidence Curve data.


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