The big call of last week was from Citi energy analyst Edward Morse, who predicted that the great commodity bull super-cycle had peaked, and that the price of oil and other commodities would enter decline.
The basic gist of his argument: Demand from China is slowing (thanks to its society slowly converting away from investment led growth) and supply is bubbling up all over the place, as investment projects finally pay off.
Morse appeared on CNBC on Friday, and it was one of the better segments we’ve seen in a while, as he calmly explained much of his call.
Among the interesting facts he noted:
- For all intents and purposes, Canadian oil is American oil, since they don’t easily export it to anywhere else, because it’s so hard to build new pipelines.
- There are about 1 million barrels of Iranian oil offline, plus another 1 million due to disruptions in places like Kazakhstan and Sudan.
- Most of that oil is being compensated by the Saudis, who are probably near their limits.
The basic gist is: High prices are taken care of high prices. The massive price surge caused an investment surge, while will lower prices over the coming year.
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