Has Oil Bottomed?

Dear Reader,

Brent Oil and Crude Oil prices measured by 1 month generic futures are up almost 50% and 100% respectively from their recent lows. Brent Oil and Crude Oil are trading at 30 USD and 24 USD respectively.

Have oil prices bottomed? Yes, in the short-term. I forecast Brent Oil and Crude Oil  nearest futures prices will climb to 52 USD and 43 USD in the next one year.

In the long-term oil prices look depressed. But, in the short-term, I think oil has gotten oversold. 

Main beneficiaries from the coming short-term upswing in oil prices are oil majors like Exxon Mobil, Chevron, BP, Royal Dutch Shell, Total, Gazprom, Lukoil and so on.
Mid-size oil producers like Marathon Oil Corporation with low costs of production could also survive and experience a significant increase in market capitalization.

Basically, oil production companies with low costs of oil extraction will survive, prosper and ultimately get bigger by buying out competitors facing difficulties. Another factor is debt. Many of the companies extracting oil by hydraulic fracturing are with high loads of debt. Such companies have relied on being profitable to continue paying their debts and go on as a going concern. The problem is that hydraulic fracturing is an expensive way of extracting oil. So many companies involved in oil hydraulic fracturing may soon go bankrupt.

However, low cost producers like Gazprom, Lukoil and Saudi Aramco i.e. the Saudi Arabian Oil Company should survive. That said, the aforementioned companies are heavily intertwined in the macroeconomics of Russia and Saudi Arabia respectively and they and their home countries could experience difficulties if oil prices stay lower for longer. These companies and their respective countries' macroeconomies are in a feedback loop.


Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich