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Another good day for oil, with Brent up 3% to $54.57 as I write. The driver remains the declining US oil rig count and no doubt some short covering. Is the bottom in?
Rigs drill wells and declines in the former usually presage rises in production for the latter as firms scramble to recover lost price with higher volumes. At least until wells deplete, which in the case of shale oil is very fast. A chart from Zero Hedge offers guidance:
Judging by 2008/9 experience, we’ve got a few good months of production rises ahead but given the very high levels of paper market trading in oil, we can expect the price to turn in advance of an improved balance of the physical market.
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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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