This paper explores equilibrium conditions within the oil market. Departing from the common assumption of no relationship in variable levels, my study provides robust evidence supporting a cointegrating relationship among real oil prices, global industrial production, and oil production. I use \cite{hamilton2021measuring} data on global industrial production and disentangle the dynamics between OPEC and non-OPEC supply. Equilibrium is restored with oil price and non-OPEC supply adjustments. I show that deviations from the fundamental value gradually diminish as real prices converge to it's long-term measure which is unbiased what is not true for the historical average and the Hamilton Filter. Moreover, the cointegration error explains 35\% of oil returns at a 24-month horizon, 75\% higher than the competitor models for this horizon. Short-term forecasts generated from the Vector VECM outperform random walk by over 15\% in RMSE reduction. These findings underscore the significance of the market clearing adjustments in the oil price dynamics.
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