Cheap oil forever? Not so fast.

by | February 23, 2016

Originally published at CNBC | February 23, 2016

Oil prices have been a source of great concern for capital markets, yet should we be worried?

After all, the imbalances between supply and demand are neither extreme nor persistent plus market forces should start to move the market closer to equilibrium by mid-2016. That ought to provide fundamental support for crude prices, paving the way for a reversion toward a more sustainable price equilibrium above $60 a barrel in 2017.

On top of that, the current oversupply level of 1.5-2.0 million barrels a day (mb/d) is not that large, especially in the light of virtually zero spare capacity. And China’s thirst for oil is unlikely to slow down materially in 2016. The country’s economic slowdown is often cited as the reason for the price correction, yet car sales there have surged in recent months and gasoline demand rose by 11 percent in China during 2015.

Filed Under: Economics

About the Author

Larry Hatheway has over 25 years’ experience as an economist and multi-asset investment professional. He is co-founder, with Alexander Friedman, of Jackson Hole Economics, a non-profit offering commentary and analysis on the global economy, matters of public policy, and capital markets. Larry is also the founder of HarborAdvisors, LLC, an investment advisory firm catering to family offices and institutional clients worldwide.

Previously, Larry worked at GAM Investments from 2015-2019 as Group Chief Economist and Global Head of Investment Solutions, where he was responsible for a team of 50 investment professionals managing over $10bn in assets. While at GAM, Larry authored numerous articles on the world economy, policy-making, and multi-asset investment strategy.

From 1992 until 2015 Larry worked at UBS Investment Bank as Chief Economist (2005-2015), Head of Global Asset Allocation (2001-2012), Global Head of Fixed Income and Currency Strategy (1998-2001), Chief Economist, Asia (1995-1998) and Senior International Economist (1992-1995). Larry is widely recognized for his appearances on Bloomberg TV, CNBC, the BBC, CNN, and other media outlets. He frequently publishes articles and opinion pieces for Bloomberg, Barron’s, and Project Syndicate, among others.

Larry holds a PhD in Economics from the University of Texas, an MA in International Studies from the Johns Hopkins University, and a BA in History and German from Whitman College. Larry is married with four grown children and resides with his wife in Redding, CT, alongside their dog, chickens, bees, and a few ‘loaner’ sheep and goats.

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