Stocktake: Oil forecasters stunned – again

What’s next for oil prices? Given no one foresaw what happened last week, when oil prices went negative for the first time in history, it may be wise for forecasters to adopt an attitude of humility.

Oil has a habit of embarrassing forecasters; as Citigroup noted last week, oil predictions that seem "almost axiomatic" can be "radically upended". In 1999, the Economist famously said the world was "drowning in oil" and that $10 might be "too optimistic. We may be heading for $5".

Instead, oil hit $147 in 2008. By then, markets had bought into the peak oil narrative and the idea of ever-escalating prices – a thesis that hasn’t quite panned out.

Decline

Still, while oil prices can confound the smartest observers, it's clear the energy sector is in secular decline. It now accounts for just 2.8 per cent of the S&P 500, notes Ritholtz Wealth Management's Ben Carlson, compared to nearly 17 per cent in 2008 and 30 per cent in 1980.

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Four decades ago, seven of the index’s top 10 names were energy companies. Today, you won’t find a single name on the list.