Since early October 2018, the markets have been clobbered.

The Dow Jones Industrial Average plummeted from nearly 27,000 to less than 24,500.  The tech-heavy NASDAQ slipped from 8,000 to less than 7,000.  The S&P 500 tumbled from 2,900 to 2,600.

Even oil prices are in a deep slump, as crude oil fell from $76.90 to $55.70 recently.  On November 13, crude oil plummeted – the steepest fall in over three years.

“The thing you have to worry about when you have a precipitous drop like this is it could be signaling bad things for everybody,” said Phil Flynn, senior market analyst at the Price Futures Group., as quoted by The Washington Post. “That’s the big concern.”

What caused this latest pullback in the oil market?

Probably the biggest reason is rampant expectations for a global oil supply glut.

OPEC just raised its production in September by 100,000 barrels a day to a total of 32.78 million, according to the International Energy Agency (IEA).  U.S. production climbed by 400,000 barrels to a record 11.6 million barrels a day, adding to oversupply concerns.

A stronger dollar has added pressure to oil prices, too.

Ongoing trade disputes between the U.S. and China have dampened the outlook for global growth of oil demand.  That could change later in November, though, when the two countries meet at the G20.

The pullback in oil is greatly overdone, in our opinion.  The sudden plunge in oil prices over the past month has forced OPEC and Russia to discuss an alliance that would agree to cut production by as much as a million barrels a day.

In fact, Saudi Energy Minister Khalid al Falih said the kingdom's oil shipments would fall by 500,000 barrels per day in December.

The current low oil prices have created some greatly undervalued oil stocks, and we are searching for potential recommendations for The Cheap Investor. 

 

Stay tuned for more on this developing story.