Conventional wisdom suggests an oil glut is keeping the price of the Brent Crude down, but who’s to say that the recovery story will not continue? While it doesn’t seem all so long ago since investors were talking about $100 barrels, today $50 is the magic number. Still, as reported by Reuters, analysts have been cutting their forecasts for the first time in six months with little sign of a freeze in global output.
“The oil industry has been losing vast amounts of cash forcing it to aggressively cut capital expenditure. According to Wood Mackenzie, the industry has slashed $1tn in capex through to 2020, creating supply problems towards the end of the decade.”
Complacency with replete inventories and a circa $40 oil price is akin, Robinson says, to being “happy that your fridge is full when nobody is planting any crops”.
[Source: Portfolio Adviser - by Gary Shepperd - August 31, 2016]
