Financial Issues - Think Biblically about your finances.

Fri, 11/7/2014

Where Can Oil Go From Here?

slowed oil flow
We can hope to see the fruit of a real oil revolution . . .


Lower oil prices have caused a bit of geopolitical fear about the outlook for markets through 2015. Brent Crude Oil has fallen about 24 percent from its highs of $115 a barrel. That should cause some huge concern to global oil producers. Oil speculators, commodity traders, and investment bankers are slashing their oil prices outlook for the immediate future. In the short term, we have to look at China. Right now, it looks as if China's economic slowdown and the stagnant European economy (the largest economy in the world) will hurt any potential growth in the oil industry for a long time to come.


We need to increase capacity by 100,000 barrels a day for the rest of this year and next year to meet demand expectations throughout the world. Some members of OPEC are much more worried about keeping their market share than they areAmerican Oilabout preserving their price. Remember, this is the first time in the history of the oil production world that OPEC has had little control over what is happening in the oil industry. They understand that more and more oil producing wells are coming online in North America, threatening their future as the cartel they once were. They have to be worried about the competition.


I think we will also see an increase in infrastructure being built so liquefied natural gas can begin exporting from places like Israel and America in the not-too-distant future. This would be good. With that, we are looking at an economic boom that could continue to happen within the oil industry. Now that we have a new Congress, we can also hope to see the fruit of a real oil revolution begin to come into the American economy.


Some of you are very concerned about your oil stocks. Of course, oil prices continue to drop, which is not good for oil stocks. But look at how much oil prices compared to your stocks. Most stocks have not dropped at the same rate. This indicates that much of these low oil prices are already priced in.


When we look at stock prices of oil, we must consider two things. Most of the larger oil companies have stayed diversified by being involved in chemical industries and other parts of the sector. A bottom in oil is already factored in to their stock prices, and they continue to see high profits. However, this is likely to end up being a six-month or so buying period for those who don't have any energy in their portfolio and feel as though this would be a good time to buy -and it is.


Oil Prices FutureLow oil prices will do something important for the future of oil: They will help emerging countries begin to get cheaper oil to grow their production and manufacturing or start upnew production and manufacturing. When that happens, they become dependent on this fuel. Once oil prices go up again, they will have two choices: to factor in the higher oil prices or go out of business. It is likely most of them will continue operations as they begin to grow on the strong foundation formed during the cheaper oil prices. In the end, this will create more demand in countries like India and China, producing a fairly stable outlook for oil companies for many years to come.



Financial Issues with Dan Celia

Fri, 11/7/2014
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