Crude Oil prices have tumbled dramatically in recent weeks. Oil now trades below $80 a barrel and while Americans are chomping down on turkey and pie this week, everyone involved in the energy industry will be closely watching the Thanksgiving Day meeting of the OPEC in Vienna, Austria.
The meeting could potentially be a theme in the credit markets and especially for those big oil companies that are more vulnerable to the weakening in oil price, such as Petroleo Brasileiro SA- Petrobras (NYSE:PBR) and Gazprom Oao (LONDON:GAZPq). If we look to Petroleos de Venezuela for instance, which has been very vulnerable to the price drop, its bonds have strengthened this week as prices stabilised but they will correlate closely to the oil price development.
But the big question is how OPEC will respond: experts who follow the oil market closely are evenly split over in their bets on whether OPEC will vote to cut product. While the OPEC has certainly lost significant clout in recent years thanks to internal squabbling and rumped up energy production in the United States, it could still drive up oil prices if it agrees to cut production.
The holiday hopes are already pretty high on Wall Street and if we try to follow "smart money" we can easily find out that hedge funds still love energy, thinking that isn't a bad place to invest. The top 10 largest stock-focused hedge funds plowed $4.4 billion into energy stocks last quarter, according to S&P Capital IQ.
While it's hard to say what their exact thinking was behind the move, they're likely looking at energy as a good long-term opportunity, since most of these firms tend to hold onto stocks for a solid chunk of time, noted Pavle Sabic, the S&P Capital IQ analyst who correlated the hedge fund data.
Prices may remain depressed for another year or two, but that's unlikely to last forever.