A few things to consider when looking at OOO:
- Many people bought as the price per barrel fell during Covid’s early days, expecting a rebound as the health concerns faded. But that thesis went to hell when the price sank to negative price per barrel due to the Arab-Russia power play. It hurt at the time!
- Prophets of doom said contango would cause “a permanent loss of capital” for OOO. However, the price for OOO has been steadily climbing back up. In fact, it’s more than doubled.
- The prophets of doom also said a vaccine within a year was impossible. The vaccine is important. As borders open up, planes will once again take to the air and the demand for oil will continue to increase. This is being reflected in consecutive days (weeks) of price rises. And as people return to work in their cars, this will also help stimulate the demand for oil. What we are seeing is a steady increase in OOO as people steadily return to normal.
- The world’s largest economy - America - has turned the corner with Covid. Finally! That’s good for oil.
- To help you sleep at night, remember that the downside risk is limited by the amount of money that governments around the globe are pumping into the system. If there’s a hint of a downturn, the government printing presses will flood the market with money and more stimulus cheques will be in the mail. OOO now has limited downside.
- Of course, there’s always the risk that Saudi Arabia will initiative another price war with Russia, as it did in March 2020. Yet as recently as Feb 21, the news outlet Arab News is reporting that the two leaders recently had talks and have agreed to support price stability. Of course, anything can happen but at least they aren’t behaving like China and Australia.
- Finally, all oil investors are hoping for a massive, overnight price surge. It’s the dream! We all know that oil supply is prone to shocks – and you don’t need a full-blown war to send the oil price leaping up.
- I'm still holding. Still underwater but not far now to get back into profit. Then plenty of upside.
