What: The share price of oil and gas producer Santos Ltd (ASX: STO) has fallen over 2% in early trade on Wednesday after the price of a barrel of oil slipped in trade overnight.
The downward pressure on oil was believed to (in part) be caused by a report that the Oil Minister for the United Arab Emirates commented that he was comfortable with how the oil market was rebalancing.
So What: It appears that global investors are beginning to view the $50 a barrel mark as a reasonable expectation for the foreseeable future.
That's not to say the oil price couldn't head higher or sink significantly lower in the near term, just that a view appears to have developed that the market is stabilising around current price levels.
There are of course numerous market analysts who have a more bearish outlook with some pointing towards OPEC member plans to boost output in the coming months, which could suggest that the rally has been overdone.
Now What: While long-term shareholders of energy producers such as Santos and Beach Energy Ltd (ASX: BPT) are nursing heavy losses, investors who picked the bottom of the market a few months ago have enjoyed enormous gains.
Santos' share price is up close to 80% from its low of $2.46 in January this year. Meanwhile, the share price of Beach Energy has soared close to 100% since touching its low of 35 cents in January.
The dilemma these investors now face is whether to lock in their profits, or whether to make the difficult call on a long term expectation of a higher oil price.
