Balance theory is (at its simplest) the concept that the relationship between two entities is either positive or negative and a combination of these relationships can be either balanced or unbalanced.
When three people are friends (positive) with each other, the relationship is balanced and sustainable – there should be no reason not to become friends. When three people are enemies (negative) with each other, the relationship is unbalanced and unsustainable, two people should team up and focus their hatred on the third – the enemy of my enemy is my friend.
Hamza Khan, quantitative analyst at The Schork Reportexplains the significance of the balance theory to the commodity complex, Consider those three people as the consumer, the speculator and the refiner. During the first six years of this decade, the relationship between these groups was positive and balanced, as demonstrated below.