The Saudis knew this was a temporary overshoot. The
As soon as the price of oil crashed, another human bias began to creep into Wall Street analysis. The same prominent voices that earlier said oil would stay high were now saying it would keep dropping!
Some well-known analysts were calling for $30 per barrel oil; one analyst even
Using our market intelligence, we could see that when oil hit the $60 per barrel level (as it did in early May), it would soon head down again. When oil got too low (as it did in late August
Absent a geopolitical shock in the Persian Gulf, oil is not going to $100 per barrel, and it’s not going to $30 per barrel. It will remain in a range of $50-60 per barrel (with occasional overshoots for technical reasons) until 2017. That’s how long it will take to destroy the
After that, the Saudis can gradually increase the price without having to worry about
This story has been bad news for frackers and even worse news for leveraged commodities traders such as Glencore. Are there any winners? The answer is yes, but it takes some detachment from the herd to see who they are.
The oil industry is permeated in gloom right now because of oversupply and weak demand. Small producers are going out of business and a wave of energy-related bond defaults is about to wash over the fixed-income markets.
Who wins in this scenario? The answer is that the major global oil producers win. They have the diversification, financial strength and hedging ability to weather the storm.
The majors can bide their time and pick up oil assets for pennies on the dollar once the
Because of human biases and crowd behavior, the stock prices of the major oil companies have been beaten down along with the price of oil and the stock prices of smaller players.
But the oil majors are in a league of their own and are positioning themselves to benefit from the rebound
The time to play this rebound is now, not when the crowd catches on.
All the best,