Here is the model we used last year to dissect the projected price behavior of oil. This was a fundamentals driven model that examined supply and demand gap, future supply sources and shocks, core demand growth drivers and relative value effects. The same approach was used later this year in building our fundamentals driven model for gold price forecast.

Our summarized outlook was simple. Oil demand growth is likely to remain stunted given high prices and a number of major issues structurally which will remove any impetus for an oil price shock similar to the one that we witnessed in 2008. With additional supply coming back to the market from Iraq and Libya, Europe struggling with the fallout of the PIGS crisis and the slowdown in China the demand situation was not likely to be rosy.

The original dated note is available on request. Please drop me a line if you would like to receive a complimentary electronic copy.