Oil: A Slippery Slope Ahead?

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There will be some amazing opportunities in oil over the next year, but for now, itís best to keep plenty of cash on hand and wait for them to fall even further. As oil prices slide down a slippery slope, itís a buyerís market and we donít have to chase anything.

...Iím sure many of you are wondering, is now a time to buy oil stocks?

To find the answer, we have to figure out how bad the oil price drop has hit the oil industry, how OPEC could actually send oil prices even lower (yes, it could happen), the short-term impact of the oil bubble, and how long complacency will last.

The drop in oil prices has taken many by surprise. Most now realize the bubble has burst. Itís been sudden and drastic and oil companies are responding with sudden and drastic measures.

The most widely noted impact is the elimination of new projects. Every oil bull will cite this as a huge problem facing the oil industry down the road.

Frankly, theyíre right. However, itís going to be a very, very long road.

If the oil downturn was just going to be a few months, oil companies would just slow down or temporarily halt production where they could. However, they are bracing for a much longer period of $50 or lower oil prices. Dozens of new projects have already been shelved, and with each passing week, more and more oil projects are added to the list...

Clearly, the glut of supply weíre facing is big. And thanks to the long period of high oil prices and bubble-like mentality of oil companies, the supply glut isnít going away anytime soon. As bubbles form, investors and companies race to capitalize on the opportunity. When oil prices started to rise, the race to make money on oil was on...

Two Ways to Go From Here

From here, oil prices are likely to continue to fall. Frankly, hopes for an oil recovery are still too high, and as a result, most oil stocks are still priced for a rebound, which (except for maybe a few short-lived spikes) isnít likely to happen...

There will be some amazing opportunities in oil over the next year, but for now, itís best to keep plenty of cash on hand and wait for them to fall even further. As oil prices slide down a slippery slope, itís a buyerís market and we donít have to chase anything.

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