MARKET OUTLOOK FOR SIA CHARTS
OPEC Maintains Oil Production
The Organization of the Petroleum Exporting Countries (OPEC) decided on 27 NOV 2014 to maintain their current production target at 30 million barrels per day (OPEC, 2014). For oil producers across the globe the mood was somber. Historically, OPEC had been the swing producer and would cut production when oil prices were low or increase production when prices were high in order to balance supply and demand. This time, instead of balancing the market, OPEC has been willing to let supply outpace demand. With a vast supply of oil on the open market and slowing demand from Asia and Europe, global oil prices are seeing their worst decline since the 2008 financial system collapse (Bloomberg, 2014).
With the proliferation of unconventional oil production in North America allowed in part by higher oil and gas prices, the world is awash in oil. Chipping away at OPEC’s market share, higher cost North American producers (for the most part) have flourished in recent years. The decision for OPEC to leave production unchanged was not an easy one. Many member nations need oil prices above $100 to balance their budgets, but further market share losses appeared to be the larger threat. With oil prices dipping only the strongest will survive. Theoretically, once the highest cost producers have been forced out of the market, supply will decrease and prices will begin to rise. How long this process will take is uncertain.
At Morrison & Partners we continue to invest our managed portfolios in a diversified manner, with capital preservation at the top of our pecking order. We will follow the same disciplined investment process we have for years with stop-losses in place to protect on the downside. In regards to capital deployment, we are looking for opportunities created by recent volatility.
Viscusi, G; Patel, T; Kennedy, S. (December 2014). Oil at $40 Possible as Market Redraws Politics from Caracas to Tehran.
Retrieved from Bloomberg at http://www.bloomberg.com/news/2014-11-30/oil-at-40-possible-as-market-transforms-caracas-to-iran.html.
Organization of the Petroleum Exporting Countries. (November 2014). OPEC 166th Meeting Concludes. Retrieved from www.opec.org/opec_web/en/press_room/2938.htm.
This newsletter was prepared solely by Bruce Morrison who is a registered representative of HollisWealth™ (a division of Scotia Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada). The view and opinions, including any recommendations, expressed in newsletter are those of Bruce Morrison only and not those of HollisWealth. TM Trademark of The Bank of Nova Scotia, used under license. Morrison & Partners Wealth Strategies is a personal trade name of Bruce Morrison.