Oil prices can provide a slippery picture

Despite a rise in prices, using oil as a signal for wider global economy may be short-sighted, as often it will fluctuate simply according to textbook economics

For the first time since last October, the price of a barrel of oil has broken through $50. So it seems a good time to update the analysis I presented in January 2015. Back then, I argued that $50 or thereabouts would turn out to be a long-term ceiling for the oil price.

At the time, with crude prices still above $60, almost everyone believed that $50 would be the rock-bottom floor. After all, futures markets predicted prices of $75 or higher; the Saudi and Russian governments needed $100 to balance their budgets; and any price much below $50 was considered unsustainable, because it would put the US shale-oil industry out of business.

Related: Is Opec relevant in an oil market of falling prices and overproduction?