Tuesday 12 June 2012

COLUMN-Tumbling oil tests notional price floor: John Kemp=2 - Yahoo! News Maktoob

Bulls will argue that marginal costs put a natural floor under the market at $90-100 per barrel for Brent (and a little lower for WTI) and help re-establish the case for taking a positive view for the market in the short to medium term.
Whether it is enough to stabilise the market must remain doubtful. Gas analysts have been waiting for marginal costs to provide some price support without much luck for more than two years. It has taken 18 months to trigger a substantial supply response, and even that may not be enough to clear the glut.
So the fact oil prices are approaching long run marginal costs does not eliminate short-term downside risk. Anyone who thinks prices cannot fall further should review the history of gas predictions. But it might just might indicate that most of the downward correction has been completed, with further falls starting to curb supply growth.

No comments:

Post a Comment