As previously mentioned in the week of December 10th, the price of oil in the world market had fallen to historical lows and priced below what we had seen in 2009 (WTI – $ 61/bbl, Brent – $ 65/bbl). As it turned out, that was not the last time prices would fall this rapidly and reach record lows. As of December 18th, WTI hit $56/bbl and Brent hit $ 59/bbl. Of course, no one can say with certainty how long this will continue and to what price the oil will drop to, but as soon as supply and demand reach their point of equilibrium and global crisis of “black gold” hit rock bottom, it is safe to say that the demand and price of oil will only grow.
When it comes down to business, it is said that in America, there are no miracles, and this is true. Everything has its own calculations, timing and logical explanation. It is all about timing. If deciding whether or not to invest in oil at this present time, it is our opinion that based on the current height of the crisis, this is a unique opportunity to do so that presents itself once in about every ten years in the energy sector. In his book The Alchemy of Finance, world-renowned financier/investor George Soros writes: “Financial markets themselves function as imperfect mechanism predictions of events in the real world. There is always a difference between the prevailing expectations and the actual course of events. The financial success depends on the ability to anticipate prevailing expectations, not on the ability to anticipate changes in the real world.”
The fact that world market prices of oil are reaching their minimum and that the U.S. is the world’s largest oil consumer predicts an eventual shortage of oil in the U.S. and internationally as well. If prices will continue to fall, or at least remain around $60/bbl, over time, the exporting countries will begin to see huge losses and will be forced to reduce supply of oil. Accordingly, oil prices and production will rise not only in the U.S. but all around the world!
