Clearly, analysts can’t see the future.
But if analysts are as wrong about oil prices as they usually are, then brent oil could be headed for $135 per barrel this year—that is, if you believe the research that analysts are doing about analysts.
Frank Holmes, CEO and CIO of U.S. Global Investors points to some interesting Deutsche Bank research in his latest Investor Alert:
Beware of biases by oil analysts: Deutsche Bank research going back to 1999 found that analysts “consistently underestimate” the Brent oil price by an average of 27 per cent. The chart below shows the forecasted price made by analysts compared to the actual Brent oil price outturn. Every year, analysts have underestimated how strong Brent will be, ranging from as little as 2 per cent to as high as 54 per cent. Using the average forecasting error, Brent could be as high as $135 a barrel.
Photo: U.S. Global Investors