LONDON (Reuters) by John Kemp – Oil prices are no longer particularly cheap by historical standards. Perceptions about prices tend to be over-influenced by recent experience so current prices feel very low to producers used to receiving $60-80 per barrel over the 2018/19 period. But over a longer time horizon, current prices are not especially cheap, and are only a little below long-run averages over the last few price cycles. Current Brent prices at just over $40 per barrel are in the 49th percentile for all months since 1988, after adjusting for U.S. inflation (tmsnrt.rs/2V1lJea). If prices were to settle at this level through the end of the year, the annual average would be just over $40, compared with an inflation-adjusted median of $50-55 since 1973. The strong rally since April is a sign crude traders are confident about a sustained rebound in consumption over the rest of this year and that OPEC+ and U.S. shale producers will restrain output until excess stocks are absorbed. As a result, the balance of risks has become more symmetrical than it was two months ago, when prices were clearly unsustainably low, which likely explains why the rally has lost some momentum over the… continue reading
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