06/25/09 Pittsburgh, Pennsylvania Oil had a strong climb, and pushed up over $70 per barrel just a few weeks ago. Then oil met with market resistance. So the price of oil retreated into the current $60 range. Could oil go lower? Yes, at least in the short term. Oil could drop back into the $50s, despite its traditional strength during the summer driving season. You might see gasoline prices pull back 10-20 cents per gallon, which will make that trip to the gas station a buck or two cheaper.
A pullback like that in oil prices will take the steam out of recent stock market gains for oil producers and oil services. So if you want to take any oil profits, now is probably a good time.
No, this is not a sell recommendation for the oil sector, or any company in the energy side of the Outstanding Investments portfolio. What I’m saying is that we might have a pullback in an otherwise long-term, generally rising trend for energy. Thus, if you are of a trading mind, then take your recent energy gains now. Book some profit, and hold onto the cash for later buying opportunities. Otherwise, don’t be shocked if the energy stocks take a summer swoon.
Longer term? Oil is headed upward in price. That’s just plain baked into the cake. Half of the world’s daily oil use is now going to developing countries. And by definition, developing countries are… developing. They are using more and more oil, or how else do you think they are developing? So even if oil use in the developed world just stays flat, that oil will still find a market.
Byron King
Byron King is the managing editor of Outstanding Investments and Energy & Scarcity Investor. He is a Harvard-trained geologist who has traveled to every U.S. state and territory and six of the seven continents. He has conducted site visits to mineral deposits in 26 countries and deep-water oil fields in five oceans. This provides him with a unique perspective on the myriad of investment opportunities in energy and mineral exploration. He has been interviewed by dozens of major print and broadcast media outlets including The Financial Times, The Guardian, The Washington Post, MSN Money, MarketWatch, Fox Business News, and PBS Newshour.
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