Crude Oil Is Long-Term Tanked
New York (Jan 17) Historically, the inflation-adjusted price of oil only exceeds $20-$40/barrel range because of geo-political events. Prudent forward thinking about oil-related investments, such as in XOM and CVX, should consider the potential that long-term oil prices will remain in this low range for a long time.
I want to make investments in ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) now that their stock prices are again nearing multi-year lows. But when is a good time to buy?
"When" obviously depends on the price of oil (NYSEARCA:USO,OIL) and how long it stays low. But what price of oil is low to XOM or CVX? And how long of a low-price timeframe should I consider?
Back in late 2014, XOM CEO Rex Tillerson said that their long-term investment decisions have been successful all the way down to the bottom of the per barrel of oil price cycle, "We test across a range all the way down to $40…" That was back when oil was dropping from $120 to $70.
It's sub-$30 today, which means we're at a price that is stressing to the oil majors. In fact, this same article proclaims that XOM "cannot survive for a long period of time at $40."
I want to make a conservative investment but these are very transitory, uncertain times. Oil's price hasn't settled yet and it's already at a low, stressing price. I don't want to get in way too early.
Now the issue of time comes in. My take is that this is likely only the beginning of a long-term period of low-priced oil. I expect this downturn to potentially take several years to work out.