Oil's Next Buying Opportunity

Keith Kohl

Written By Keith Kohl

Posted October 24, 2009

Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publication articles.  

After breaking the $75 a barrel mark recently, oil prices continued to climb during the past week. By Wednesday, prices peaked at $82 per barrel, closing $2.25 higher than the previous day. And even though a move back to $75 per barrel was expected, oil prices held steady over $80 per barrel.

Like many of you, I can’t see oil holding this level much longer.

The reason?

For starters, the market seems to be ignoring the fundamentals. On the one hand, the oil glut is still a red flag waving in front of us, while demand remains weak.

As the EIA reported earlier this month, global oil consumption fell 3.2 million barrels per day during the first six months of 2009 (compared to 2008 levels).The EIA also expects oil prices to average $70 per barrel this winter.

Even a stronger dollar wasn’t enough to cause a steep drop in oil prices.

According to a Bloomberg report on Friday, "The dollar strengthened against the yen to the strongest level in a month and gained versus most actively traded currencies on speculations the Federal Reserve will increase interest rates sooner than expected."

By the end of the week, the dollar found more support after a home sales report showed that U.S. existing homes sales rose to a two-year high.

For many, this news is a sign that the housing market is recovering. Personally, I’m not convinced. . . 

Is this the recovery sign you were looking for?  

Buying Opportunity

The good news is that we can look forward to one thing: the next buying opportunity. Oil may be headed back toward $75 per barrel next week, which will put a lot of our oil and gas back into our target range.

Next week, we’ll take a look at some of those energy companies, especially as this sell-off continues.

Enjoy your weekend,

keith kohl

Keith Kohl

Energy and Capital

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