The $9.2 Billion Bet Against OPEC Dominance

The $9.2 billion investors paid to snap up new equity offerings from U. S. oil companies in 2016 proves those investors are indeed ready for more punishment.
The amount is in line with the pace of such equity offerings in 2015 even as the mood in the oil markets has grown increasingly dour. In June of last year I wrote:
New investors in U. S. oil company shares must believe they are catching the bottom and will have a very profitable ride up from here. This demonstrates that OPEC’s work is not done and accounts in part for the decision to leave production quotas unchanged. OPEC’s next task is to convince those making new investments in oil that, rather than catching a bottom in oil prices, they have caught a falling knife.
A lot of investors did end up catching a falling knife as oil careened downward from about $60 a barrel last summer to Friday’s close of about $36. Investors this year may still find that the knife is falling, though it admittedly doesn’t have as far to fall this time around. Still, it seems they misunderstand OPEC’s strategy or believe that that strategy will fail. As I said in the same piece:

This post was published at Wolf Street by Kurt Cobb, Oilprice.com ‘ March 9, 2016.