Thursday, November 27, 2014

Oil Price Collapse: Buying Opportunity?

For the past few years I've discussed my "shopping list" of investments I track which I believe have strong long term fundamentals. I like to wait until assets on the list experience major price declines combined with low sentiment levels before making a purchase. Oil has been on the list for the past few years, but I've consistently felt the price and sentiment surrounding it were too high for me to step in and make a purchase.

That has changed.

This morning OPEC announced they would not be cutting production in the months ahead and oil is currently in free fall, down close to 7% on the day at $68 a barrel. Oil is now down 33% from where it was it late June (over $100 a barrel).

Wall Street was thoroughly bullish on oil in June after prices had risen steadily throughout early 2014. Articles discussed why higher prices were imminent due to Russia, geopolitical tensions, and global growth.

Today we read everywhere there is no floor for the price. The discussion is centered around how low oil will eventually fall and the new trading range it will move within over the next five years (estimates range between $30 to $70). The bulls, of course, have completely disappeared.

I'll be a buyer of oil and oil related energy stocks moving forward until it begins to move higher and positive sentiment returns. Will the price fall lower from here? Almost assuredly. I look forward to the panic sales in the strongest companies.

Oil related assets will be added to a buying list that currently includes precious metals, uranium stocks, agriculture, and emerging market bonds. These are light positions as I continue to heavily add cash (U.S. dollars) in anticipation of larger sell-offs coming in other attractive but overpriced markets. I am not making an investment recommendation to anyone, but readers of the site often ask me what I am purchasing today.

For more see: $75 Oil Makes Shale Oil Unprofitable

1 comment:

  1. Hi Tuna, any advice on how to play on the oil price collapse? Are there EFTs you like or do you buy shares in specific companies?

    ReplyDelete