Tight energy markets are here to stay

Precarious position before

Global energy markets have experienced remarkable volatility over the past two years. West Texas Intermediate (WTI) crude oil famously printed a negative price in May 2020 during the depths of COVID lockdowns.

But earlier this year, in the wake of Russia's invasion of Ukraine, crude jumped to around $130 per barrel, reflecting a ‘war premium' and fears of Russian supply losses. Since then, prices have moderated. Countries have taken steps to mitigate the production shortfall, and the war and sanctions have not disrupted the Russian supply as much as initially feared. While the oil market has avoided the worst-case scenario in the near term, we believe secularly tight oil markets and high volatility are the most probable outcomes over the next decade. Energy market participants may not yet a...