Buffet is well known for his ability to assess future investment developments and potentially attractive companies to include in an investment portfolio. His recent focus has been on energy purchases, and his company, Berkshire Hathaway, has received regulatory approval to buy a half stake in the oil firm Occidental Petroleum. And why oil?
Oil prices remain high
Oil prices have been at their highest in recent months. They did see a slight correction during last Tuesday's trading session due to fears of tighter monetary policy in the face of rapidly rising inflation, which could put a damper on the global economy and the associated demand for oil, but prices remain high. The price of the WTI crude oil futures contract for November 2022 delivery hovered around $89 per barrel during Wednesday's trading day, and the price of the North Sea Brent futures contract for November 2022 delivery was around $96 per barrel.*
Negative factors affecting the price
Factors that may negatively impact oil prices in the coming weeks are fears of a possible recession and planned interest rate hikes by the Fed and the ECB, which would motivate investors to retreat to safe havens and would mean potential capital outflows from oil investments. The price may also be pushed down by the re-emergence of COVID-19 cases in China and the associated restrictions, the decline in factory activity, as well as the troubled real estate sector, as a result of which the world's second-largest economy is experiencing weak growth. Bearish signals are also reported by OPEC+, which announced that the baseline scenario is an oil surplus of 900 thousand barrels per day this year, 100,000 barrels per day more than a month ago. However, Saudi Arabia indicated a few days ago that OPEC+ could reduce current production and thus stabilise commodity prices. [1]
Factors favouring growth
Factors that may in turn positively affect the oil price in the near term include petrol inventories, which fell by about 3.4 million barrels, while inventories, which include diesel and aviation fuel, fell by about 1.7 million barrels for the week ended August 26, according to data from the American Petroleum Institute (API). [2] The decline in petrol inventories was nearly triple the 1.2 million barrel drop that analysts polled by Reuters had expected on average. For inventories, they had forecast a decline of around 1 million barrels. On the other hand, oil stocks rose by around 593 thousand barrels, while analysts' estimates were for a fall of around 1.5 million barrels. Prices have also been supported in recent days by the intensification of the fight between Moscow and Brussels, which was reflected in Gazprom's halting the flow of natural gas on a key supply route in Europe on Wednesday.
Oil companies with potential
The data speaks clearly. According to data from Investing.com, the price of Brent crude oil has risen by 33 percent over the past year, and the price of WTI by 28 percent.* The potential for investment in the context of future energy growth forecasts may be - as I indicated in the introduction - particularly in oil company stocks. [3] It is not for nothing that a well-known fortune-teller from Omaha included one in his portfolio.
Olivia Lacenova - analyst at Wonderinterest Trading Ltd.
[*] Past performance is no guarantee of future results
[1,2,3] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.
