Displaying items by tag: crude
Oil prices have taken a nose dive lately, and yesterday officially fell into a bear market. Prices on Brent crude fell below the $70 per barrel mark for the first time since April. US crude is even lower, with prices sitting at $59 per barrel. For most of the summer the market was worried about undersupply, but the US has been more generous with sanction exemptions on Iran, and the US, Russia, and Saudi Arabia have all boosted output, alleviating fears and pushing prices lower.
FINSUM: The oil market seems to be trading based on supply and demand fundamentals—just like it should. It is very hard to predict how things will progress.
Oil prices have risen spectacularly over the last year, with Brent crude now trading above $80 per barrel. However, the question for investors is what to do about the rise. Have they already missed the gains? Additionally, oil has the complication of being difficult to invest in directly because of the cost of rolling over futures positions. Therefore, the best way to take a position in oil markets is through several ETFs. The tickers to look at span from those covering major oil companies to those more weighted towards E&P companies. Here are some of the funds: VDE, XLE, IXC, IYE, XOP, OIH, and USO.
FINSUM: We suspect that exploration and production companies will gain the most from recent price rises as their businesses will be most directly impacted by gains (just like they were most hurt in the downturn).
We tend not to write too much about oil, the reason being our readers don’t seem too interested in it. However, the market has quietly seen a really resurgence over the last year or so, and has risen dramatically from lows in the $20s in 2016 to $75 now. The core reason why is that a booming global economy has pushed up demand for oil (to the tune of 5 million barrels per day), which has largely cleared the glut of oil inventories that had been plaguing the market.
FINSUM: The big question now is whether OPEC maintains the supply cuts. It is worried about higher prices inducing increased production from rivals, but the reality is that Saudi Arabia needs oil prices to stay high right now for several reasons (e.g. IPOing Saudi Aramco, domestic social and economic reforms etc).
Oil prices have been rising strongly on the global market. However, those gains took a breather yesterday when eye-opening new info emerged on the oil market—the US is now producing more than 10 million barrels of crude oil per day. The mark was hit in November, and arrived much sooner than anyone expected. The US has only broken that threshold twice in the past, both times in 1970.
FINSUM: Okay so our big concern with the oil market right now is that these higher prices are not sustainable. The fundamental oversupply of oil has not been solved. The only thing holding up prices is the fact that OPEC members, for the moment, are happy to let the US benefit disproportionately from their output cuts. This output figure might change that.