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Commentary

Our Forecast for Oil Prices Has Risen

We expect a continued increase in OPEC's influence.

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The energy sector is no stranger to shocks that push the price of oil well above or below levels that would appear reasonable to someone focused on the long-term economics of the industry, and recent history is no exception. Oil prices have seen sizable gains over the past few years. Emerging and developed economies have boomed simultaneously, lifting demand. On the supply side, political unrest has grown in countries crucial to the world's oil supply while hurricanes struck supplies in the United States.

The only thing that appears certain is that new shocks will continue to batter the price of oil well into the future. Unfortunately, the timing, magnitude, and direction of these forces is often unexpected (otherwise it wouldn't be a shock). So how should an investor value and invest in firms involved in the production of oil? It's clearly not a simple task.

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Eric Chenoweth has a position in the following securities mentioned above: CVX, XOM, SU. Find out about Morningstar’s editorial policies.