Crude Oil set to Plunge to Historic Lows from Price WarsWith the virus well underway, and the USD still holding up reasonably well (for now), crude will continue its historic plunge to record lows. Sometime by the spring or summer of this year, I see crude being around $20-23 before stabilizing sometime in 2021 (remember: crude this low is NOT a good thing for world equities and stocks). This re-stabilization will likely be off the backs of the DXY decreasing in value, rather than some sort of economic turn-around.
What was once thought to be some sort of multiple-expansion and economic turn-around from the USA-China "truce" has now been completely blown out of the water due to the coronavirus, which will likely slip the entire world into a recession. Normally, this means that OPEC must reduce production in order to meet the reduced supply quota to keep prices somewhat stable. However, due to geopolitical issues, oil-rich countries have decided to gouge each-other with price wars rather than adjust accordingly, which will force crude to plunge to historic lows.
Here's what to expect:
- $20-23 crude for oil in 2020
- Potential flash crashes into the $30.00 range or lower within the coming weeks or months
- US 10 Year yield to hit 0.000 and likely negative in 2020
- US equities (and world equities) to remain significantly under-pressure until the US 10 Year rebounds to at-least 1.000 and crude stabilizes to near $45
What to do:
- Hold mostly cash and/or gold bullion (non-leveraged) and/or stable/low beta equities like utilities and high quality dividend aristocrats (my top picks are Fortis and Franco-Nevada)
- Enjoy lower gas prices, eventually
- zSplit
