Fears of future energy crunch tilt oil curve

By Matthew Robinson - Analysis

NEW YORK (Reuters) - Rising concerns about an energy supply crunch in the coming years are helping send up long-term crude prices much faster than the dazzling rally in short-term prices, a trend that could prompt oil companies to start beefing up stockpiles.

Analysts say a rise in resource nationalism during oil's six-year rally has ratcheted up the cost of doing business in many producer nations and has reduced access to key reserves needed to meet growing world consumption, spelling a worsening energy crisis in the next five years.

"Since the first of the year, if you look at spot WTI (West Texas Intermediate crude oil), it is up 30 percent, but when you focus on the long-dated (it is up) 50 percent," Goldman Sachs analyst Jeff Currie said in a conference call.

"The long-dated price is not pricing the supply and demand of the fungible commodity that we see today but rather pricing supply and demand of long-term capital to invest in long-term production capacity," he said.

Front-month crude oil CLc1 shot to a record near $134 a barrel on Wednesday, but December 2013 CLZ3 peaked at over $138 while December 2016 CLZ6 crude topped $142.

This market structure, called a contango with near month crude trading at a discount to later month crude, generally reflects a near-term supply overhang and expectations of tighter markets further out. But it also tends to encourage energy companies to fill up their storage tanks as the supplies they are storing gain value over time.

"I fully expect that for the next seven quarters we are going to see a commercial inventory build (with) supply outpacing demand," said Edward Morse, chief energy economist for Lehman Brothers.

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