Walking into a room to discover that the floor keeps slipping and sliding is a common problem in MC Escher drawings, supervillain deathtraps and states of exceeding inebriation. The predicament also seems to be spreading to the oil market of late.
World crude prices have paused following their collapse this month. US oil is holding at $82 a barrel and Brent at $85. How tempting to look over the cliff edge and conclude that the floor is not, in fact, too far down. One support may simply be that disruptions to supply (which have been declining lately) may rise again because of political tensions.
Perhaps $80 or $70 is the lowest price at which capital remains willing to finance expansion in US shale oilfields, the supplier of that market’s marginal barrels. Or the floor may (also) be the lowest price at which Opec producers balance public spending with revenue.