Market Overview

Barron's: Here Comes $20 Oil

Barron's: Here Comes $20 Oil
  • The cover story in this weekend's Barron's makes a case that the price of oil will bottom at $20 a barrel.
  • Why a recovery in oil means a recovery in stocks is also discussed.
  • Other featured articles focus on mutual funds, master limited partnerships and biotech companies.

Oil could fall as low as $20 a barrel in the first half of this year, says this week's cover story in Barron's. But as it recovers to $55 by year end, that could help drive stocks, which have closely followed oil prices, much higher.

"Here Comes $20 Oil" by Gene Epstein points out that an indicator that has been correct for the past two years suggests that oil prices soon will bottom at $20 a barrel. See why Barron's expects the price of oil will recover to $55 late in the year and probably will bring a recovery in equities along with it.

Says one analyst quoted in the article, "We think that the world is poised to lose a lot of oil production in the U.S., Colombia, Mexico, Venezuela, China, and then potentially in Russia, Brazil, and the United Kingdom sector of the North Sea," a precursor to the return of the bull market in the second half.

Among the questions addressed in the article are the following:

  • What role will a further slowdown in global growth, especially from China, play?
  • How will the world consumption of oil hold up in 2016?
  • Why have Saudi Arabia and Russia decided to ramp production to full tilt?
  • How close to capacity is storage space in the United States and elsewhere?
  • What will be the long-term consequences of Congress lifting export restrictions?
  • How soon will Iranian production have a noticeable effect on supply?
  • What does the Commodity Futures Trading Commission's weekly Commitments of Traders Report have to tell us?
  • And is a return to triple-digit prices for crude oil likely in the foreseeable future?

The article also includes a look at how well Barron's forecasts of the price of West Texas Intermediate have been since March of 2014. In addition, there is a chart showing how closely the price of oil and the price of gasoline have been correlated since 2013.

See also: Barron's Picks and Pans: Kinder Morgan, Gilead Sciences And More

Other Feature Stories

Check out the special report on the best mutual fund families and see how Eaton Vance Corp (NYSE: EV), T. Rowe Price Group Inc (NASDAQ: TROW) and other leaders avoided the pitfalls of the past year.

Find out why a brash young energy analyst who was mocked for his short calls on Kinder Morgan Inc (NYSE: KMI) and Chesapeake Energy Corporation (NYSE: CHK) is getting the last laugh. It seems the worst may not be over for the master limited partnerships (MLPs).

Discover why Barron's thinks that Celgene Corporation (NASDAQ: CELG) and Gilead Sciences, Inc. (NASDAQ: GILD), which have been ailing along with other biotech stocks, could rally over the next year.

At the time of this writing, the author had no position in the mentioned equities.

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