It has been a bad two months for oil investors. The fall in the oil price has been only slightly off-set by the falling Aussie dollar and the resulting tumble in energy stocks has created a lot of uncertainty for investors.
To help you make sense of the chaos, here are the three things every oil investor must know today:
1. Has oil bottomed out?
According to British bank Barclays oil may have reached a low point for the year. Bloomberg reports that the bank believes the price of oil "should recover modestly" for the remainder of the quarter as the over-supply in production eases.
The price for crude oil has fallen 24.5% since its June high of US$102 per barrel and such a fall has not been seen since mid-2012.
The falls have had a mixed impact on shareholders in Australia's big energy companies. Shares in Santos Ltd (ASX: STO) for example are down 11% since June as the company increasingly relies on oil-linked pricing, while Beach Energy Ltd (ASX: BPT) has tumbled over 30%.
Woodside Petroleum Limited (ASX: WPL) has been one of the best performing energy companies down just 2.5% as higher contracted pricing becomes effective on Pluto LNG production.
2. Forward outlook
The million dollar question on investors' minds is where is oil headed next?
Reports vary, but many analysts seem to think oil is set to bounce higher. Barclays is forecasting Brent crude at around US$89 per barrel in the last quarter of 2014, while Bloomberg reports Goldman Sachs commodity head Jeffery Currie expects Brent to average US$85 in the first quarter of 2015.
3. Bargain hunting
For investors it is important to remember that the price of oil has a long history of volatility and is generally rising and falling all the time.
The recent falls have sent investors scarpering from the growing energy producers which rely on oil revenues for exploration and development. But these same companies now look mighty cheap relative to their long-term prospects.
Senex Energy Ltd (ASX: SXY) is one. Senex shares are down 32% since June, but the company has reiterated its aspirations to grow 2P reserves by as much as 275% in the next three years, yet sells for just 14 times earnings.
Meanwhile, fellow Cooper Basin producer Drillsearch Energy Limited (ASX: DLS) is reportedly popping up on a number of broker 'buy' lists after falling 21%.
