Oilman Harold Hamm — founder of Continental Resources, a top 10 U.S. oil producer pumping a quarter-million barrels per day — made the decision to halt drilling new oil wells in January. At the time, prices had fallen to levels that made production uneconomic.
Oil was trading around $57 per barrel back then. Only two months later, it’s nearly $100 per barrel, a more than 70 percent rise.
As they say in the oil patch, the only cure for low prices is low prices. When oil prices collapse, producers cut investment, supply shrinks and prices eventually recover.
In this case, war in the Middle East sparked this. But producers that shut down when prices fell have not fully returned. Less supply means prices can rise even faster when disruption occurs.
In roughly 60 days, oil has gone from uneconomic for some producers to the center of the investment universe.
Only one country equity market was positive in March: Saudi Arabia. The reason is obvious.
