So the oil market is recovering, right?
Not so fast.
Oil ministers from OPEC claim they need at least until next month to decide if this rebound is for real, or simply a temporary phenomenon. Just because there are small improvements in the market, there’s no guarantee of a full-on recovery as of yet.
In October, the price for a barrel of Brent crude rose 2.5%, after falling by a whopping11% in September. And although it’s way too early to come out and claim the oil industry is out of a bear market, it’s may just be a matter of time.
We’ll learn OPEC’s decision later this month.
As you know, there has been a major slump in drilling activity, with the number of rigs actively drilling for oil in the U.S. falling to a five-year low as oil prices plummeted 38% over the past twelve months.
Moreover, U.S. crude output is slated to drop by 10% by this coming April, and production is likely to decrease by a million bbls/d from its peak in early 2016.
That doesn’t paint a very bullish picture for the industry, does it?
Fortunately, one axiom in the oil market is that the cure for low oil prices is… well… low oil prices.
The only question is how long it will take low oil prices to cause production destruction via the dearth in drilling activity. Once that occurs, you’ll see just how quickly traders will turn bullish.
On a positive note, it does appear that oil has found support above $45 per barrel — which means prices will only go up from here!
To continue reading…
Click here to read the Rigzone article.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
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