Monday, March 30, 2015

US economy risks if oil stays low

Oil can go up in the short-term but I think actually that there's some political motivations at play here and Saudi Arabia is at risk of losing its position as the marginal price-setter and I don't think they want to lose that position.

I think the Saudis will potentially carry on [with their policy of not cutting back on oil production] and production will remain high. 
Time Magazine cover article on oil prices

If you look at the US economy, the bulk of capital expenditure and jobs growth has been in and around the shale and energy-related sectors so if crude is down around the $30-$35 mark for a significant period of time I think you're going to see a default cycle in the US energy sector.