Energy prices are volatile. Not long ago, oil was trading at around $150 a barrel. That had many drivers depressed while the Middle Eastern sheikhs and Russian tycoons were swimming in oceans of cash.
Then, the game has changed with shale oil producers in the United States adding to the supplies of the black gold. It seemed America was about to be set free from dependence on the Middle East when it came to energy supplies. That surely made Saudi Arabian oil bosses unhappy. So, they decided to continue to pump oil to take their competitors out of business by depressing prices.
This has led to an unprecedented drop in oil prices of more than $100. Now, oil trades around $30 a barrel. And a great transfer of wealth to the consumers is taking place. Meanwhile, investors are confused. Some industry analysts say there’s an opportunity to make gains on oil’s rebound. Others say it’s not the right time. At least, not yet.
As TheStreet.com reports, George Soros recently sold all the shares of Chevron, Chesapeake Energy, and NRG Energy. This is a vote of no confidence on this industry.
This move makes many investors reconsider acquiring shares in the oil industry even though many companies now seem to be attractively valued. But, Soros isn’t a newbie. The man knows what he’s doing most of the time. That’s not to say he’s always right, but rather that his investment performance is among the best results recorded in the history of investing.
As a finance guru and a speculator, George Soros made billions of dollars over the past few decades. His personal fortune is estimated by The Street to be around $25 billion. As a speculator, Soros became famous more than 20 years ago when he made a billion dollars on a bet that the British Pound will collapse.
Lately, Saudi Arabia teamed up with Russia, and now both countries want to freeze production. But Iran, a country of immense oil wealth, declined to join. After years of sanctions, the Iranians are hungry for hard currency. Now, as sanctions get lifted, Iranian oil will reach the markets, only adding to oversupply.
The outlook for the oil doesn’t look favorable. The World Bank predicts oil will average $37 a barrel this year. Its previous estimate was over $50. Another bad news for oil companies is that with the rise of more efficient electric vehicles, the demand for the black gold may get weaker.
Only time will show if this 86-year-old multi-billionaire is right again.