Another week, another impressive fall in oil prices.
There have been a series of psychological thresholds through which oil prices have crashed over the past few months. In the beginning of October, oil prices dropped below $90, only to slip past $80 by the end of the month. Prices then dropped more slowly through November, until the OPEC announced its decision to leave its production quota unchanged. From there, all bets were off – oil prices crashed through $70 and then $60 per barrel within two weeks.
In the first week of January, price projections were once again thrown out the window with WTI dipping below another crucial threshold – $50 per barrel. At each level, investors who went long on the energy industry – thinking that prices had bottomed out – were demolished.
At this point, it may sound reckless to try and predict which way oil prices are going, but here goes: oil prices are nearing a bottom and there is an enormous opportunity to ride the wave back up.
But before we get there, let’s take stock of the industry.
Financial Bloodshed Across the Sector
Watching oil prices drop by more than 50% in six months is something that only comes around once every decade or two, so investors should appreciate the magnitude of what is going on here. There have always been booms and busts in the oil industry but we are currently witnessing a profound bust not seen since the 1980’s (prices crashed further…