May 27, 2016
By Peter Bower
Oil is fighting to find a new equilibrium. Clearly, $26 per barrel was too low and not sustainable. Supply was being eliminated at that price at a rapid rate. Companies were going broke and an awful lot of production cost more than that and would have been shut down. Somewhere around $60 per barrel, the incentive to produce more kicks in. There are many prospects that would be nicely profitable at prices above that price.
If markets need to be near balance to operate efficiently, then that level is somewhere between the low and prices above $60. We may now, at $50 per barrel, be somewhere close to what economists like to refer to equilibrium. That price may move around some as the market participants test both higher and lower levels. The good news is that the extreme volatility that this market went through may be subsiding. That bodes well for other markets; stay steady my friends.
The Lonely Bull
