Wikimedia CommonsTar bubble at the La Brea Tar PitsOil might have been in a bubble that's now popping.
Gluskin Sheff Chief Economist and Strategist David Rosenberg observed in his Friday morning research note that:
"Well, with perfect hindsight, oil was in a classic bubble: parabolic price moves, tremendous excitement, widespread prticipation by the investing public, a ton of leverage."
Rosenberg noted that, when bubbles in the past have burst and then led to further problems in the financial markets, there was a delay of at least a few months. If the bursting of the oil bubble has secondary effects, they may hit later this year.
He included a table showing the last nine bubbles, including the oil bubble that is currently collapsing. Assuming oil follows a similar peak-to-trough price trend as other bubbly assets in the past, Rosenberg believes that if oil already hasn't hit its low, "then we are seemingly very close to a bottom in oil price."
Gluskin Sheff