Investing in oil has its ups and downs. Investors were richly rewarded when oil traded over $115 a barrel in 2014, but then nearly lost it all when crude prices as low as $26.21 per barrel last February.
Hope is on the horizon though… because oil is back.
Oil has risen steadily over the past few months, with a barrel of WTI costing almost $49 a barrel today. This rally is also one reason why its a great time to get back in the oil market—and will turn out to be a huge buying opportunity for individual investors.
You don’t want to wait until oil is trading back in the $70-$80 per barrel range, do you?
And even though oil prices will continue to rise for a variety of reasons, the imbalance between supply and demand remains the biggest catalyst.
After all, the global oil glut was the primary reason why oil prices have declined so much since the summer of 2014. Truth is, the glut should have been predictable given the fact that horizontal drilling and hydraulic fracturing have opened a wealth of oil and natural gas resources within the United States.
The ensuing shale boom that took place drastically reduced the United States’ demand for foreign oil from countries like Nigeria and Saudi Arabia, which in turn forced them to sell their production at a steep discount.
Supply Cut Off
Now, low prices have finally taken their toll, and the supply/demand imbalance is starting to ease.
Cheap crude, however, has also had an impact on exploration, and the search for future supplies. Only 2.5 million barrels of oil were discovered outside of North America in 2015 — the lowest amount since 1952.
There were reasons for these disruptions: terrorist attacks in Nigeria interrupted their oil production, supply in Canada was cut sharply due to the massive wildfire burning up the oil sands patch. Venezuela, the largest supplier of oil in South America, is on the brink of collapse from social unrest that could lead to a civil war. A recent labor strike in France has affected operations at all eight of its oil refineries, and over 20% of gas stations across the country are out, or low on gas.
All of these supply disruptions have helped crude oil prices rally over the last several months. A few industry analysts believe oil could be trading back over $80 per barrel by 2017.
It’s only a matter of time before this buying opportunity is gone for good.
To read more about rising oil prices, read the CNBC article.
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
