TD on oil price factors playing out, concluding that the risk of a runaway rally in oil prices is declining.
Says 'the West' is 'losing control over commodity supply', but nevertheless developments to global spare capacity 'have likely flattened the right tail for energy markets over the coming year.'
TD argue that this is likely to cap the upside to long-dated Brent prices
- 'and also decreases the risks of a sustained runaway rally in spot crude prices above $100/bbl over the medium-term'
TD add on the oil price outlook:
- is constrained by ongoing additions to global spare capacity, such that substantial price gains are likely to unleash additional supply. However, Gulf nations have managed to increase their control on global spare capacity, suggesting that the group of producers can continue to engineer a tighter market without fear of significantly losing market share to competitors. Instead of offering structural tailwinds to prices from an evaporating pool of spare capacity, oil markets are more likely to remain range-bound at elevated prices for some time.
Brent update:
