• Even if oil prices are volatile, demand is stable and costs are known. This allows us to find the balance value and trade around it.
• With oil above $50, all big producers are profitable and expanding investments and production, but that’s not a good long-term sign for oil prices.
• For low risk, high return investments, investors should wait for some kind of panic that pushes oil prices below $40.

Introduction

In March when oil prices were around $54 per barrel, I wrote an article that described a low risk, high reward investment strategy related to oil.

The article, available here, advised readers to wait for oil prices to fall much lower to lower investing risk and increase returns because the long-term oil price is defined by supply and demand surrounding production costs while in the short term, anything can happen as OPEC news can easily move markets. More →