Gartman Says Bearish Oil Market Will End in Panic Liquidation

It is the beginning of the end: in a short interview on CNBC, Gartman explained quite remarkably why the current trend for bearish Oil prices is going to end up in a heavy way.

Some details: the dirty deal of unsustainable oil prices and thousands of futures betting on low crude oil is coming to and end; it will be when some oil companies will go bankruptcy, new M&A will come up to the surface and venture capitalists will decide that the price is worth their bet.

In that situation microeconomics can be very useful to understand the basics of what is going on now for oil companies and now we are in a situation which with the appropriate precautions is similar to the Bertrand model of Oligopoly, where in the end the profit for the main industries will be 0.

Another point to be taken into consideration, which is quite strange and economically speaking dangerous, is that the same companies which are producing oil have bigger amounts in oil futures, than what they could earn from producing at a higher price, so they are obliged to bet on even lower prices in order not to lose on both the bet and their core business.

To sum up, besides some big failures on the road and unless some generous venture capitalist wants to revive a walking dead, there will probably a big round of M&A between medium and little sized companies with safe credits and clean balance sheets that is going to pave the way for the next generation of oil companies.