Schroders: Energy – a serious bout of indigestion

Our view is that the energy markets suffered a serious bout of indigestion caused by:

1. Extended positioning earlier in 2014 –investors had built up long positions as thetensions in Ukraine and Iraq rose, and were overextended coming into Q3.
2. A jump in supply – Libya delivered additional crude to the market despite domestic instability, which coincided with the seasonal ramp-up in Saudi production.
3. A counter-seasonal softening in demand – the economic activity in Europe and China continued to soften causing weaker demand than usual over the summer months.

Interestingly, the longer end of the futures curve actually rallied following the Russian sanctions, which could constrain long term supply growth.

Our view is that prices are likely to settle at around these levels, with a recovery only likely if we see stabilisation in Europe or a reduction in Saudi supply.

Der vollständige Bericht im pdf-Dokument