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01 December 2014

OPEC deciding that the price of oil does not matter in their quest of maintaining market share should be good news for everyone, but is it? Below $100 Venezuela, Iraq, Russia, Iran, some US shale and Canadian oil sands are all operating at a loss. Below $80 Saudi Arabia and deepwater oil from places like Angola, Brazil, Norway and the UK  become loss making, below $60 the average US shale operation is loss making, and below $50 Kuwait cannot balance its budget. This raises the question of possible debt defaults for the likes of Venezuela and perhaps others. In 2008 Oil hit a low of around $34 briefly before rising again - there does not seem any reason why it will not do this again. Bargains are appearing all over the place in the oil sector but great care needs to be taken as we may not be anywhere near the bottom on the oil price.

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