Oil will most likely go up over the next year, especially after a significantly low price. Also, cleaner technology is still too expensive, so oil is the way to go for many countries that are developing. I imagine going long in oil futures is hot right now.
Especially right now the price is at... $37ish vs even October when it was around $50 I believe.
Not so fast. Low oil prices are here to stay in the immediate future. Global oil storage capacity is nearly topped out.
http://www.msn.com/en-us/money/markets/dow-jones-drops-on-crude-concerns/ar-BBo472u?li=AA9ZWtY&ocid=ansmsnmoney11Crude oil lost 2.9% to close at $36.76 a barrel after American Petroleum Institute inventory data released Tuesday afternoon showed a stockpile build of 2.9 million barrels, far ahead of expectations. Today’s Energy Information Administration numbers showed a 2.6-million-barrel build vs. a drop of 5.9 million barrels last week.
Adding additional pressure were comments from Saudi Arabia’s energy minister that his country’s oil output strategy is “reliable” and won’t be changed.
Other wrinkles include rising U.S. oil production and the fact that global crude storage is quickly approaching capacity. Seasonally, stockpiles tend to drop at the end of the year and rise in the first few weeks of the New Year due to tax implications. A repeat in early 2016 could well push crude oil to fresh lows not seen since the early 2000s.
A tank topping in various areas of the energy market is looking increasingly likely heading into 2016. In a recent note to clients, Goldman Sachs said avoiding inventory top-out would require a slowdown of production, due to producer financial stress and the shutting of funding for producers with oil near $40. But that’s just not happening.
Their warning: Oil may need to fall to cash costs near $20 a barrel to force production cuts.
I previously thought oil reaching $20 was unfathomable, but the world is not using near the oil that is currently being produced, and producers are refusing to cut production. When the world tops out storage capacity, the price will fall dramatically. Only then will producers begin to change their tune about the rate of production.
