While continued weakness in crude oil and natural gas prices are expected to weigh on the energy sector’s performance over the next 6-9 months, investors with longer time-horizons will find many attractive opportunities in this battered group. In terms of commodity prices, we believe that crude oil will take its cue from the direction of the broader global economy. Natural gas, on the other hand, is a North American story and developments here over the coming months will determine its outlook.With the heating season halfway through and visibility on the economy’s front still elusive, we expect continued downward pressure on oil and natural gas prices over the coming weeks. However, with OPEC’s supply cuts helping remove the current inventory overhang — expected to start showing up in early spring — and sentiment on the economy improving following the stimulus, crude oil prices may start consolidating in the second half of the year. If the economic picture turns out to be bleaker than expected, then a renewed move towards new lows in oil prices cannot be ruled out.
Oil and Gas Prices
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