How oil can get back to triple digits by 2017

After years of being too high, oil forecasts now appear too low. As supply rolls over we could see prices back at $100, with decade-high geopolitical risks shocking it higher.

Spot, or immediate, prices are hard to model as demand is not linearly elastic, but dependent on hundreds of variables. Historical correlations also become irrelevant when sharp moves occur.

Oil due for delivery in three to five years is easier to gauge. This should approximate the marginal cost of production for a given level of future global consumption.

While spot prices are well off their lows, future oil is at levels last seen in the depths of the financial crisis when we were braced for a depression. The back end of the oil curve has effectively moved to partial-cycle costs, no long...