After a year 2015 full of losses and a global-wide oil price crisis, 2016 seems to bring new developments to the oil market. After starting out a on the same note as 2015 at reaching close to $28 a barrel, oil prices seem to have bottomed out and voices from the investing world are starting to consider long oil positions as core ideas for their 2016 portfolio.
The main reason behind the recent spike in oil prices is the prospect of an alliance between Russia, Saudi Arabia and other OPEC countries to cut supply in the recent future. Although such an agreement is very far from being indefinitely binding for either party, it should provide some well-needed tailwind for oil prices. The U.S. have also seen their production slow down slightly, so over-supply issues can be put behind us as oil should return to around $50 a barrel, as experts say.
BP, one of the biggest oil producers worldwide, share the belief that oil prices could see a low in the first quarter of 2016, while other consider that this low was already set below $30 in mid-January. After oil supply and demand manage to find their new equilibrium, probably in quarters three or four of 2016, we should see oil prices going back to more usual prices.
These recent developments are good news for oil trading, both globally and on the U.S. stock market. The recent spike found some buyers who were looking for the first signs of progress in order to add big oil positions to their portfolios. For the first time in quite some months, panic selling is not dominating the oil market and the balance between bulls and bears can be found again. This cannot be anything else but good news for the future developments of this commodity, which along with gold is thought to be one of the best investments in 2016, although they are both risky.