Don't rush in to oil stocks
If you’re thinking of buying oil stocks on the basis that the oil price will start to rise soon, you should perhaps think again, says Merryn Somerset Webb.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Twice daily
MoneyWeek
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Four times a week
Look After My Bills
Sign up to our free money-saving newsletter, filled with the latest news and expert advice to help you find the best tips and deals for managing your bills. Start saving today!
Thinking of buying into oil producers and explorers on the basis that the oil price will surelystart to rise again in the very near future? Maybe don't.
I explained recently why the oil price is likely to stay lower for longer in this cycle than in most.The real story is high and rising supply, and that view is backed up by the fast rise in US inventories this week. They now stand at 487 million barrels. That's up from 385 million at the start of the year (already a lot) and a level not seen at this time of year for over 80 years, says Russ Mould of AJ Bell.
Demand for oil always rises when oil prices fall (note that in the US vehicle miles travelled over the past 12 months hit a record high of 3.1 trillion miles during August). But clearly it isn't rising anywhere fast enough to offset the fact that Saudi Arabia is caught in a nasty prisoner's dilemma' that forces it to keep pumping even as prices fall, and that US shale is becoming cheaper and cheaper to extract. Or, for that matter, the rising dollar (there is strong inverse correlation between the dollar and Brent Crude).
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
We usually say that the cure for falling oil prices is falling oil prices (in that low prices mean production cuts which mean higher prices). But that doesn't seem to be the case this time round.
So, rather than buying into oil at the moment, you might be better off devoting a little time to worrying about the dividend income you get from it either directly or via the income funds pretty much everyone is holding at the moment (they have been at the top of the brokers' most-popular lists for several years now).
As Mould notes, the oil companies account for some 13% of total amount of cash the UK's big companies are expected to distribute in 2016. What if they can't pay out? Quite.
-
Average UK house price reaches £300,000 for first time, Halifax saysWhile the average house price has topped £300k, regional disparities still remain, Halifax finds.
-
Barings Emerging Europe trust bounces back from Russia woesBarings Emerging Europe trust has added the Middle East and Africa to its mandate, delivering a strong recovery, says Max King
-
House prices to crash? Your house may still be making you money, but not for much longerOpinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
-
Prepare your portfolio for recessionOpinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
-
Investing for income? Here are six investment trusts to buy nowOpinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
-
Stories are great – but investors should stick to realityOpinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
-
Everything is collapsing at once – here’s what to do about itOpinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
-
ESG investing could end up being a classic mistakeOpinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
-
UK house prices will fall – but not for a few yearsOpinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
-
This isn’t the stagflationary 1970s – but neither is it the low-rate world of the 2010sOpinion With soaring energy prices and high inflation, it might seem like we’re on a fast track back to the 1970s. We’re not, says Merryn Somerset Webb. But we’re not going back to the 2010s either.
