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Daily Gains Letter (www.DailyGainsLetter.com), an e-letter published by Lombardi Publishing Corporation, a 28-year-old consumer publisher that has served over one million customers in 141 countries, is weighing in on the supply-and-demand imbalance in oil and opportunities open to aggressive investors in 2015.“Oil prices have been in declining since July, the drop being exacerbated last month when the Organization of the Petroleum Exporting Countries (OPEC) said it would not cut back production. West Texas Intermediate crude oil was trading above $100.00 per barrel in early July and is currently trading near $55.00 per barrel,” says financial analyst George Leong. “With no strong base in sight for oil prices, investors could see additional downside moves; $50.00 looks like a pretty good area for support, but this may not be bad news for all investors.”
Leong explains that even though OPEC meets again in June to discuss its production levels, Saudi Arabia has said it will never cut its output, with the oil cartel blaming part of the oil price weakness on speculation. Weak oil prices can also be attributed to the slowing global economy. (Source: Defterios, J., “Saudi Arabia: We'll never cut oil production,” CNN web site, December 22, 2014; http://money.cnn.com/2014/12/22/news/economy/saudi-arabia-oil-production/.)
The International Energy Agency cut its global demand outlook for the fourth time in five months and OPEC cut its oil demand for 2015 to the lowest level in 12 years. To change the supply/demand imbalance in oil, it will be up to non-OPEC producers to supply cutbacks. (Source: “IEA releases Oil Market Report for December,” International Energy Agency web site, December 12, 2014; www.iea.org/newsroomandevents/news/2014/december/iea-releases-oil-market-report-for-december.html.)
“The end result has been chaos in the energy market, with many oil stocks losing 50% or more of their value in a short period of time, which breeds a potential aggressive investment opportunity,” Leong concludes. “Aggressive traders may wish to look at adding call options on energy stocks on the major weakness. Further, investors may want to consider an expiry in January 2016, as the option premiums are not too expensive at this time for the calls; this will allow oil stocks time to rally.”
For more information on Daily Gains Letter, visit www.DailyGainsLetter.com.
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.lombardipublishing.com.
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