Wednesday, December 16, 2015

Oil Prices Lower for How Long? You decide

The business media is currently full of year end predictions, and many concern the future price of oil.
Goldman Sachs lead the charge in predicting much lower prices for oil back in September of 2015 when analysts for the firm published a report saying prices could drop as low as $20 per barrel.  here

And now that oil spot market prices have dropped to the $35 range in mid-December, the market is now set-up for an epic battle for the game of “who is going to be right?”  Ron Insana injected his view on 12/8/2015 that an Oil recovery by 2017? Not likely.  He foresees price levels approaching $20 per barrel and shale oil drillers surviving through higher productivity.  Alternatively, on 12/4/2015 Daniel Yergin, Vice Chairman of IHS, explained his view on Why oil prices cannot stay this low, here.  He sees a range bound trade of $40-$60 for oil over the intermediate future.

Not one to be satisfied with just following the news cycle to assess the probable direction of the market, I gathered some useful facts about the current oil market.  I share them in this article to help investors make their own informed decision about their energy market positions and investment strategy.

U.S. oil market prices on a roller coaster ride since 2008

 

Oil prices hit an all-time high over $147 per barrel in the summer of 2008, and 6 months later were below $40 per barrel as the U.S. financial crisis left no asset class unscathed, with the exception of sovereign government bonds like U.S. Treasuries.  The price of oil experienced a similar downward juggernaut from June of 2014 into early 2015, dropping from over $100 per barrel in June 2014 to below $40 per barrel by the winter of 2015.  The price of oil has since stayed stubbornly on average below $50, and now seems to be making $40 the over / under zone.

 



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