Commodities vs. Technology in Trading

Guest post from Paul Somerfield:
In commodity trading, it’s important to take two kinds of technology into account. The first is technology that can affect the underlying price of the commodity and the second is disruptive digital technology that can change the way commodities are traded.
Technology can be a game changer for commodity prices Take oil. A decade ago we were all being told that we’d reached peak oil, and that declining stocks would mean an astronomically high oil price in the future.
Yet, at the time of writing, Brent crude is trading at $61.33 a barrel, way below its peak price. So what happened? Technology happened, that’s what. Advances in exploration and drilling technology meant that oil previously locked up in shale could be mined. An enormous amount of new inventory was able to exploited. So much for peak oil and a crude price nudging $200. Right now, the OPEC producers are trying to get the price so low that the US shale industry calls it a day because it’s not worth the expense of fracking and horizontal drilling to extract the oil.

This post was published at Deviant Investor on November 4, 2017.


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