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Monday, December 19, 2016
The price of oil is up 22% over the last month. More than 9% of that return came in just one day.
That's crazy! After a move like that, oil must be due for a breather, right?
History tells a different story... one that's far more interesting...
In short, larger gains are possible. We could see $70-a-barrel oil over the next year. And 41% gains are possible over the next two years, based on history.
Let me explain...
Oil prices have been all over the place in 2016.
They were in the $20s at the start of the year. They then nearly doubled... And they have bounced around at less than $50 since.
Until the recent breakout, at least.
Oil jumped 9% in a single day. And it's up 22% over the past month. That's a major breakout. Take a look...
What caused this incredible return?
OPEC – the global oil cartel – recently announced it would cut global oil production. And that dramatically changed the supply-and-demand outlook for oil.
History says it could mean much higher oil prices, starting now.
OPEC's ability to control oil's price isn't what it used to be. But the organization still makes up roughly one-third of the global oil market share... And it controls more than 80% of the world's proven crude-oil reserves (based on OPEC's 2015 estimates).
OPEC has only cut its production a handful of times since 1998. But as the table below shows, production cuts usually lead to higher oil prices. Take a look at the returns...
OPEC's production cuts don't happen often – only 14 other times since 1998. But oil prices generally soared after these cuts...
We've seen average one-year gains of 31.5% and average two-year gains of 41%.
A 31.5% gain from here means oil prices would hit $70 sometime next year. And a 41% two-year gain would put oil around $75 a barrel.
That might seem like a crazy move higher. A $75 price is roughly triple the low we saw earlier this year... But it's completely possible, based on history.
The facts here are simple... OPEC agreed to make production cuts. And oil staged a major breakout as a result.
If history is any guide, we should expect much higher oil prices next year. And 41% gains are possible over the next two years.
After the election, demand for industrial metals surged. Now, their prices are soaring – and so are the stock prices of certain mining companies. "History says they could soar as much as 30% over the next year," Brett writes. Read more here.
"Gold and silver got the headlines for most of 2016," Brett wrote recently. "But over the past few weeks, copper has staged a massive breakout." Learn why 40%-plus gains are possible over the next year, and the best way to make the trade, right here.
NEW HIGHS OF NOTE LAST WEEK
Berkshire Hathaway (BRK-B)... Warren Buffett's holding company
Bank of America (BAC)... banks
JPMorgan Chase (JPM)... banks
Goldman Sachs (GS)... financial services
American Express (AXP)... credit cards
Cardtronics (CATM)... ATMs
Ferrari (RACE)... luxury cars
General Motors (GM)... cars
Marriott (MAR)... hotels
FedEx (FDX)... shipping
Boeing (BA)... airplanes
United Technologies (UTX)... plane engines and more
Chevron (CVX)... oil
ConocoPhillips (COP)... oil
Hess (HES)... oil
Halliburton (HAL)... oilfield services
Schlumberger (SLB)... oilfield services
CBS (CBS)... media
Thomson Reuters (TRI)... media
Comcast (CMCSA)... cable TV
iRobot (IRBT)... robots
Microsoft (MSFT)... software
Walgreens Boots Alliance (WBA)... pharmacy
International Paper (IP)... paper
Papa John's (PZZA)... pizza
Wendy's (WEN)... fast food
Sysco (SYY)... food products
Pool Corp (POOL)... pool supplies
Waste Management (WM)... trash removal
NEW LOWS OF NOTE LAST WEEK
Not many... It's a bull market, you know!