Richard Savage, Head of Energy Research for Mirabaud & Cie, a private Swiss banking firm, noted over the weekend at a conference held in Oman that oil’s $147/barrel peak last July was driven not by fundamentals but by “the same surfeit of liquidity that drove other asset classes to unsustainable highs.”  The withdrawal of said liquidity, he stated, means that “the market is once again being driven by fundamentals, and with inventories at near record levels and OPEC sitting on 5 million barrels of spare capacity, we do not expect a recovery anytime soon.”

Savaged continued that in his estimation, once the price of oil does eventually rally, “we do not see a return to a $100+ per barrel world.  We believe a $75 per barrel oil price is high enough to incentivise all but the most expensive producers; it is high enough to encourage investment in alternative energy sources; and it is high enough to put a break on the explosive demand growth that was the catalyst for the last oil price rally.”