Since the whole question of oil plus investing came up in this thread, I'll give my two cents. Where I'm coming from, I own a baby oil company that does direct investment in reworking orphan wells in Texas. I also have a small tiny fraction of a percent of three publicly traded companies.
1. No one is really sure how low oil is going to go. We all have our gusses, mine is Brent not lower than $40/bbl, and WTI not lower than $37/bbl. I believe we are nearing a bottom on both oil and natural gas so have recently increased my holdings in the publicly traded companies.
2. I do not think the oil recovery will be as rapid as people are talking about. Saudi (and OPEC), Russia, and others (including US) are not cutting back production (though some US producers are starting to reduce production as the price continues to decline), the demand is not increasing significantly (yet), and supplies are so high companies are renting oil tankers not to transport, but to just hold it. If that were not bad enough, as companies in the US cap wells due to low prices, they can just as easily uncap, rework, and start producing from known wells once the price starts to climb back up, which will easily add to the supply. My little oil company breaks even at roughly $50/bbl because of the low volumes (usually 10-15 bbl per day per well). I'm not doing anything, and have not since $80/bbl. I imagine other small producers are in the same boat, and are just waiting for the price to get above their BE point to start working again.
3. The conspiracy theorist in me says Saudi is intentionally flooding the market with oil for two reasons. First, the US has been steadily increasing production, thus lowering the quantity of OPEC related oil we consume (their market share has been declining). So increase the supply, the price declines to the point US production is no longer sustainable, and then OPEC market share is protected. The bonus for Saudi is Iran's sanctions limit the quantity of oil they sell on the open market to 1 million bbl per day. By causing the price to decline Saudi is hurting Iran by cutting Iran's income 60%. The reason the US government is not bothering to step in and chat with Saudi about limiting production (or even asking OPEC to stick with their 30 million bbl per day quota, which they can't as they are still producing roughly 31 million bbl per day) is because the drop in oil prices happens to hurt Russia as well... and the US is trying to hurt Russia right now in order to curb their actions in the Ukraine. HOWEVER, I believe Russia is doing an end run around the sanction problem by selling their oil directly to China in trade for gold. If you notice, China has been buying significant quantities of gold for a while, and Russia's gold supply has been increasing, and they are still pumping oil despite sanctions and lower prices. This undocumented oil transfer is having the effect of lowering China's reported demand. If China's actual demand is unchanged, but a portion of it is now being met by Russian oil, then their reported demand will decline. This will negatively effect the reported global demand, which will cause further price declines.
So, this is all my internet opinion, and some conspiracy theory thrown in for fun. Thank you for taking the time to read through it.
