Energy prices, along with all commodities, will look back at 2011 as the year of intense correlation to the macro economic environment. Successful energy traders not only had to have a firm grip on traditional supply and demand fundamentals; a strong understanding of macro events and their consequences were essential to be on the right side of price movements. Unfortunately for energy market participants, 2012 will require the same nimbleness to accurately navigate the major tidal movements of the macro economic waves.
2011 began the year with a strong upward trending pricing structure for crude, mogas and distillates. Crude reached a high in April of $115 on the hopes of a strong world wide economic recovery. Then came the less than stellar US economic data in May, combined with fears of European sovereign debt, creating a sell off in crude down to $75 in October. Crude has since rallied back to the three figure level with one week left of trading for the year on hopes that the United States and emerging market economies will carry world economic energy demand.
Forecasting 2012 energy futures will not be an easy task as these macro economic forces will continue to mystify the best of traders. Until clear trends manifest themselves again, successful market participants will incorporate hedging strategies to compensate for influences well beyond the traditionally relied upon fundamental tells of supply and demand; contango and backwardation.
