Alright, I know Oil has been pounded down lately. From over $150 a barrel just last year to $35-$40 a barrel as I write this blog post. Just like their was a bubble last year when speculators rushed into oil pushing it up to unbelievable level, the poor economy and reverse bubble has caused it to be pushed to unbelievably low levels now. Just like Speculators were investing in oil, pushing demand up greater than the actual supply needed to fulfill oil use, this time short sellers are selling more oil then there are buyers (users).
Oil is unlike other investments like stocks and bonds in that it is also a commodity. Under normal circumstances the price is determined by the supply that Opec and other oil producing nations make available, and the demand the world economy has on it to run automobiles, factories, etc. When Speculators (investors) enter a commodity market it can drive prices away fromt he normal equillibrium.
So, what do I predict? I predict that as the World economies begin exitting recession mode by the end of this year, demand for oil will increase, while the short sellers start covering their positions. This along with the fact that supply stockpiles will be low, prices of oil could easily rebound to the $80-100+ range within the next 18-24 months. Thats a quick 100-150% gain in months, not years.
Learn more abotu the markets including Oil at: Talkgold Investing Forum
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