Oil: Could Have Been $200 In 2008; Might Reach $20 In 2016

Jan. 05, 2016 7:39 AM ETCRCQW, CRRTQ, CVEO, OXY, XOM34 Comments
Tom Armistead profile picture
Tom Armistead


  • In 2008, both Goldman Sachs and John Kilduff saw $200 oil as a distinct possibility.
  • For 2016, these same luminaries see $20 (or even $18).
  • There has to be a better way to analyze the price of oil: certainly projecting extremes based on momentum is not working, except as an attention getting ploy.

The headlines are scary: For 2016 oil may bottom at some mythic level, either $20 or $18, depending on which oracle you consult. Of course, back in 2008 these same gurus were calling for a stratospheric high of $200. Here are some links:

1) Goldman calls for $200

2) Goldman calls for $20

3) Kilduff calls for $200

4) Kilduff calls for $18

On a simplistic level, one could simply average the four calls, arriving at a target of $109.50. Instead, I chose to locate some data, and perform a relatively straightforward analysis of the same. Here's a chart:

The only sophistication involved here is the use of a logarithmic scale. I feel as if it makes the data more intuitively and visually accessible. I sketched in a couple of lines, to form a channel, and circled some salient low points. Unless there has been a paradigm shift of some magnitude, oil should recover to something in the $90 area, and well before 2020.

My best guess, oil wanders around in the neighborhood above the lower red line and below the blue regression line. The thinking would be, the commodity spent a lot of time above trend, and drew in more capital than was required to maintain stable pricing. So there will be a period of capital destruction.

It's Possible to Project Balanced Production and Consumption

Using the EIA STEO International Petroleum and Other Liquids Production, Consumption and Inventory data monthly from January 2011 to the present, I used the spreadsheet trend function to project forward.

For production, I started with August 2015, the most recent high, and made the heroic assumption that reported results through November were a trend, which I extended through 2016.

For consumption, I used January 2011 to November 2015 to develop the trend, and extended it through

This article was written by

Tom Armistead profile picture
I'm a well-informed retail investor and post on SA in order to expose my thought process to critical examination and comment from readers. It makes me a better investor. I'm particularly proud of bullish macro articles posted in 2009 and later, in which I presented ideas that encouraged me to invest very profitably in a rising market. I also did articles on individual stocks, many of which contained insights not available elsewhere. Finally, I wrote a number of thoughtful articles critical of financialism and the lack of ethics on Wall Street. I donate the proceeds from my blogging to charity. The best way for me to monetize my insights is to invest accordingly. As a retail investor, I don't give investment advice. I write about what I'm investing in, and the thought process involved in decision making and stock selection. Hopefully some of what I write is of benefit to others, by sharing my experience as I interpret it and helping them improve their investment thinking and process.

Disclosure: I am/we are long XOM, OXY, CRR, CRC, CVEO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (34)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.