Guest Post by Susan Wade
Oil prices may have fallen by more than half in the last six months, but a slight rebound over the last week appears to have rekindled some interest from investors looking to put their money somewhere into the industry.
In the last week alone, the price of Brent crude has managed to recoup around 20 percent of its value, with one of the most popular benchmarks seeing a rise from the lowest $49 per barrel up to $58. A significant climb considering recent activity.
So perhaps then, there is a small opportunity for investing in both the oil companies themselves, and their support services. However, while opportunities are certainly good now, the overall outlook for oil from many analysts is reasonable, and it’s likely that prices will move and remain somewhere in the range of $60-$70. Once this happens, the value of oil companies should price up accordingly. In short; the window of opportunity and refreshed interest in the sector is a narrow one. And is it actually real anyway?
Volatility and Split Opinion
A second thing to be aware of is the volatility we’re likely to experience in the short term; something that is causing many analysts to be dismissive of the rebound. Oil is a favourite for day traders right now and they do tend to amplify things. They’re the first ones to jump in en-masse when things rebound, but will also pull out quickly when the inevitable happens.
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This does mean that not all analysts are convinced that the recent upturn is anything of particular interest. A senior vice president at Sims & Co has said that “It’s yo-yoing,” and that he doesn’t “…think there’s anything serious behind this.”
The fact is that Saudi Arabia is still producing and discounting that oil in oversupply in order to keep its market share, and both Iraq and Brazil are pumping more into the markets too.
One of the most likely things we can glean from recent developments is that there are lots of investors and companies poised to take advantage when those prices really do rebound properly, and this slight interest shows it. As James Marshall of Atlas Commodities LLC says: “Nobody wanted to be that guy that watched it fall 50% and then watched it rally 20% and did nothing.”
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Written by Susan Wade
