Today oil price are between $35-$40 (Oil prices were on their way up to $145 a barrel, from as little as $50 in 2007). Investment adviser told about oil price "It’s not the time to try to call a bottom… but it is time to plan for it."
When the U.S. stock market bottoms, along with the economy it will be an L-shaped bottom. More reason to believe that we’re going to bottom eventually but not go far off that bottom once we do.
Economic side
"For one thing, just as demand is falling, supply may be about to get tighter, especially in energy commodities. Oil-producing countries have recently announced massive production cuts. "In three to five years' time, I would not be surprised to see oil prices at $100 to $150 a barrel, or even higher " (source : CNN)
New additional oil production from megaprojects and new EOR activity will be substantially weaker than had formerly been believed because so many projects have been put on hold due to lower prices. It will probably take 1 - 3 years of much healthier oil demand than is currently the case and much higher pricing to bring back those projects and there will be considerable time lags before they can come on stream. " One example of the deferral of new oil production projects is the Canadian oil sands( source : Jim Kingsdale
"There will be no rapid increase in oil production from Iraq or Nigeria. Political developments in both countries, including particularly the removal of American forces in Iraq by the end of 2011, offer little reason for optimism that above-ground conditions will improve markedly enough to result in a rapid escalation of oil production in either country despite substantial development interest"
In addition to the positive week in the US, China has put in motion plans to substantially increase their petroleum reserve over the coming years, adding a long term underlying bullish factor.
We suggest that people contain any oil purchases between $35 and $40—not above $40 at this point in time. Oil longer term is far more likely to be higher than that level than equities looking out the same timeframe. As bearish as oil looks right now in the demand destruction, we’re also having development destruction, which happens very fast. We have argued for almost four years that the peak oil theory, which many people latched onto during the last dramatic rise, couldn’t come into play without another recession and without what has been taking place in the oil market recently. As we get into the next economic recovery, which I think will be more a world recovery versus a U.S. recovery, the peak oil argument could have a more pronounced effect on the oil price. That’s particularly true in light of the fact that this decline has caused just about everybody to stop any real new exploration and hold off where expectations of oil were high, such as the tar sands in Canada.
So, if people are still willing to look out three to five years versus three to five days, I think oil is a better risk-reward at this point than the U.S. equity market. (source: comodity online)
0 comments
Post a Comment