Outlook for the U.S. stock markets and interest rates
1999 Stock Outlook: Review and Update
Outlook for Ex-Soviet Equities
Outlook for Oil
Outlook for Small- and Microcap Sectors
Outlook for Initial Public Offerings
Outlook for Global Stock Markets
Outlook for Oil
There is something hauntingly beautiful about oil. Maybe it's the distilled history of time, the conversion of rotting carcasses into pure energy...Anyone who has stood on top of the black oceans of Western Siberia cannot but relish the visceral pleasure that hydrocarbon extraction and cracking can provide to those who are philosophically inclined...
But then you'd have to acknowledge the analytical point of view: The chart of crude oil prices looks hideous. Taipan has been unpleasantly surprised by the persistent weakness in oil. Our energy-related equity plays have not performed well in 1998. Not well at all...
In the short term, oil will remain weak. The failure of oil to rally on turmoil in the Gulf is a definite bearish sign.
There hasn't been the kind of catastrophic one-day plunge that usually characterizes a selling climax -- you remember, the stuff we saw back in 1991 when Sassy Saddam was playing hide the cucumber with the stiffbacks of the United Nations. The buyers need to capitulate. Until there is mass capitulation, the trend will be down.
Rude crude
But after the downside capitulation, a bull market in oil will begin. Regardless of short-term oscillations in the price of crude, there is a finite amount of hydrocarbons on the planet. The smartest scientists I know estimate that the world's total supply of hydrocarbons will be exhausted in five decades. The current oil glut will soon be replaced by an oil shortage.
Improvements in oil exploration and extraction technology have accelerated the rate of reserve depletion...While this has bearish short-term implications (already reflected in the 50% decline the price of oil futures), it has very bullish long-term implications. Western consumers are hooked on cheap oil. Everyone drives fuel-inefficient vehicles like Sport Utility Vehicles.
As Asian economies return to growth, demand for oil will improve. Reduced capital budgets for the oil majors mean less oil is coming out of the ground (the oil drillers are already feeling the pain). An improving supply/demand picture will put a floor under oil prices over the next twelve months.
Taipan's Forecast for 1999:
Taipan predicts that oil will experience one final catastrophic shake-out to under US$9 per barrel. After the decline, a massive and lasting bull market in oil will begin. Our one-year target is US$16 and our three-year target is US$20. The average price for 1999 will be between US$14 and US$15 per barrel.