The Oil Rebound

On January 12, we published our blog article: Why Oil Won’t Stay Low Forever. The West Texas Intermediate (“WTI”) spot price – or the price you’d have to pay on that day to own a barrel of oil – was $30.42. The drop from June 23, 2015 ($61.05) was very concerning to investors at the time and what ensued in the market more broadly was a long-term fear projection based on short-term volatility. Our argument was that the drop in oil was temporary because commodity prices are subject to the same laws of supply and demand as most of the rest of the world.

As of today, the WTI spot price is $49.36, 62% higher over the course of 4 ½ months. Clearly we couldn’t have predicted how fast and how far the rebound would occur. In fact, we said exactly that in the article. Still, the oil rebound happened, like we thought, and it appears to be continuing.

Investing well can be a humbling exercise for the best prepared and most disciplined among us. One of the keys to assessing opportunities and threats correctly is distinguishing between actual long-term trends and short-term extrapolations. When short-term fear grips the capital markets, it can create attractive opportunities to make good long-term investments. Be sure you (or your advisor) remain on the right side of short-term emotion.