Analysts: Enjoy Low Oil and Commodities Prices While They Last
Jonathan Xiong, director of Mellon Capital Management, at the Reuters Investment Summit.(image: reuters.com)
It might be convincingly argued that financial markets operate according to an inverse law of gravity: What comes down must go up. In other words, when the prices of certain commodities sink, they will, like buoys, pop back up.
At least that’s what analysts claimed at last week’s Reuters Investment Summit, which convened in New York to discuss current financial trends and market outlooks. Some of the world’s most influential investors suggested that the current dip in crude and heating oil prices simply represents a “correction” in the market, and that a resurgence in prices isn’t far off. As Jonathan Xiong, director of Mellon Capital Management, put it, “Commodities are very momentum-driven and there’s still quite a bit of momentum left in the markets.”
The lesson is just because prices dip doesn’t mean they’ll stay down. According to investor Jim Rogers, “Oil has gone down 40 or 50 percent four times since 1999. It’s not ended the bull market in oil.” Despite the fact that oil has lost nearly ten percent of its value since the start of December, big investment groups like First Quadrant are still predicting US oil prices to return to above $80 per barrel by the first quarter of 2010. Many investors point to the promise of economic recovery, especially in emerging markets like China and India, as good reason to expect higher oil prices next year.
