ICYMI: The price of oil has experienced modest yet noteworthy gains over the past 30 days.
2015 and 2016 have not exactly been the greatest calendar years for oil producers, commodity markets, or gas stations. As we’ve covered previously, the price per barrel of oil recently plummeted by +70% over an 18-month span. After reaching record highs of +$105 in mid-2014, the price/barrel of oil dropped as low as $26.50. The unprecedented collapse in the price of oil can be directly attributed to a massive oversupply of the resource combined with decreased demand. This is due to the accessibility of alternative energy such as wind and solar, along with the skyrocketing production of non-traditional global oil producers.
If had a big set of balls and decided to bet on the price of oil increasing around mid-February, you’d be stacking somer serious paper. As you can see in the chart below, the price/barrel of oil increased by about 55% between February 15th and April 15th. Despite this small sign of a recovery, don’t call it a comeback yet….
If you’ve been paying any attention to the global-political tension revolving around the production of oil, it definitely would’ve required a serious set of stones to pull the trigger and invest in oil. Historically-dominated oil powerhouses such as Saudi Arabia and Russia have been unable to reach agreements regarding caps on oil production. with newer players like Iraq and super-new players like Iran. It’s ultimately in the best interest of all of these countries to agree to slow down oil production and allow the price of the commodity to rebound a bit. Then again, this is global politics. With big egos at play (Putin; Salman), and power-hungry newcomers on the horizon (Iran), don’t expect negotiations to necessarily “progress”. While the gains in oil have been noteworthy, the price increase is extremely susceptible to volatility.
Now here’s a fun question: let’s say you threw down and invested in oil on February 15th… would you take your winnings now at a +50% gain, or would you ride this sucker out and see what happens?
As for me? I would probably sell off about one third of my position right now. Take a partial profit while still maintaining serious up-side potential. Kind of a best of both worlds scenario… Who knows though? Maybe everyone will reach an agreement and sing Kumbaya. Or maybe Iran will try to bomb someone and fuck everything up even more.