Oil prices falling, what is the consequences to your investment?

The biggest business news in these 2 weeks have been that crude oil prices have been falling from a peak of US$120+ per barrel to US$60+ per barrel ever since news of oil over-supply got circulated around and then OPEC decided to maintain their oil production.  This is further escalated by other oil producing countries to maintain their production volumes, thus resulting in over-supply and expected fall in oil prices! 

To add oil to fire, Saudi Arabia has just started to cut the prices of oil they sell, effectively starting a "price war".  To this end, only the lowest cost oil producers, like Saudi, will survive if oil prices fall to US$30+ per barrel.  US$30 per barrel level is believed to be the lowest threshold that Saudi is willing to go in a price war and is already more than enough to kill off most of its competitors whose cost of producing oil are generally between US$30-70 per barrel.

Who will be the casualties then?  Who are the highest cost oil producers?  It seems that Russia, Brazil, Valenzuela, and even Norway are higher cost oil producing countries because it cost more to extract oil from deep seas and deeper ground. 
Even oil from oil sand in Canada, and shale from US will not be spared because of their higher costs. 
A figure of about US$60 per barrel has been floated around as the cost of oil extraction from oil sand and shale, below which these companies will make losses and cannot survive for long. 
Note that the low oil price is expected to stay for quite a while (may be for another 2-3 years) and time is need to wipe out the higher cost oil producers because most of these producers are probably hedged for 1 year on the high oil price and they will only feel the pain of low oil price after 1 year of sustained low oil price. 

However, falling oil prices to rock bottom price is good for huge oil consumption countries (as exposed to oil production countries), such as US, China, India, Singapore, Thailand etc.  Meanwhile, both Malaysia and Indonesia's oil and oil-related industries will be affected to a certain extent.  Note that Malaysia derive about 1/3 of their revenue from oil and oil-related industries.  Even UK will also be affected due to their huge revenue from North-Sea oil production. 

With falling oil prices, US will benefit from lower living cost inflation, thus US stock market and hence S&P500 index is expected to have further fuel to continue the bull run (even after QE has been removed and even if interest rate raise only moderately).

Singapore will benefit from lower living cost inflation as well.
However, beware of oil-related stocks like Keppel Corp (BN4), Sembcorp Marine (S51), Sembcorp Industries (U96), Ezion Holdings (5ME), Nam Cheong, Swiber, Ezra, Swissco, etc!

However, this will also means that soon S$ will depreciate against its other trading currencies, particularly US$.  Beware!

In summary:
1) Avoid investment in oil and oil-related industries!
2) Beware of falling S$ vs US$.

US$ shows convincing sign of uptrend vs S$

The last time I mentioned that US$ is likely to rally against S$, the exchange of US$ to S$ is about 1.26.  Now, the exchange is 1.291, or an increase of about 2.46%. 
This trend is expect to continue................................

US$ exchange rate will be going up soon, what should you do?

If you are a Singaporean, and all your CASH is denominated in Singapore Dollars (S$), you may want to consider to invest in other currencies that may be gaining strength, such as US Dollars (US$).  As US$ gains strength, the exchange rate of US$ vs S$ is expected to increase, and S$ will drop. 

Next question then will be: how high will US$:S$ go? 
Well, nobody knows, but what we can be confident is that US$:S$ will not stay at such low level as 1.26 as US$ gains strength.    Remember, we have seen the trough at about 1.24xx.