Where is the Oil Industry Going Now?
What happened to the long-term reliability and durability of oil stocks among energy markets? For years countries around the globe have relied almost entirely on middle-east OPEC nations to provide the world’s oil supplies. Although there are other oil-producing nations, OPEC countries had a strangle hold on the bulk of oil flowing into the US and many other developed nations. Supply – and therefore prices – were under the control of those few high-producing countries. Oil companies knew where the supply was coming from and had a fair idea of what the cost would be. Beyond political turmoil or war in those regions the price and supply were reasonably constant.
Then came the trend for countries looking for alternative sources of energy, and especially oil. Science revealed methods for extracting oil from shale and supplies began to flow from sources unavailable for economic production by traditional means. With oil prices continuing to climb, fracking and even deep water exploration were cost-effective and profitable undertakings for oil companies. Even small independent companies with a handful of employees could become profitable energy producers enabled by these new extraction techniques. US oil production has increased by nearly 80% since production levels experienced in 2006 as reported by the US Energy Information Administration.
But today’s lower oil prices are expected to last well into 2016 or even into 2017, making the economies of small operations no longer attractive or cost-effective. Over-supply has kept the price of crude oil at record lows reducing the phenomenal profits global oil companies have enjoyed in recent years and squeezing out many of the smaller fracking entrepreneurs. Until oil prices are raised to a higher level these marginal producers will be left out of the significant profit picture. Low operating costs allow some to continue production, although higher prices will make them more attractive to finance and operate.
What is the Day Trader Impact?
OPEC nations are meeting to discuss strategy and production levels in mid-April. Reasonable expectations are that there will be decisions made to decrease production levels at least to some extent to spur the price of oil by reducing supply. This could have the nearly immediate impact of a price increase that re-triggers the market volatility day traders swarm to.
Resumption of fracking and other alternative oil source production could quickly become viable and targets for investment as well. Oil industry trends could be on an upward swing if the anticipated decision to reduce production becomes reality.
Oil Industry Investing
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