All Entries Tagged With: "Oil"

Despite recent Slowdown, I Remain Bullish on Oil

Crude oil fell again yesterday on Wall Street, leading to a stagnate eight weeks for the sector as prices continue to fall. Whether or not you are invested within Oil maybe you should be as recent indicators prove the oil industry to be very bullish now long-term. Despite the drop in oil prices, oil futures continue to rise proving that prosperous times are ahead of us. More prospective news came along yesterday when OPEC reported that they expect global oil consumption to grow a modest 500,000 barrels a day in 2010, after fall the previous two years. Goldman Sachs also predicts similar results saying higher oil prices will be fueled by a stronger economy and higher global demand especially in China, India, the Middle East, and Latin America. In OPEC’s monthly market update, they stated that oil would fall barely to around 1.6 million barrels a day. This results in only a small decline around 83.8 less million barrels a day as the world economy stagnates. Though the good news overall is that these recent projections are less severe than we had projected last month. World oil demand is just following the same path the current world economy is taking by settling down after struggling through the long hauls.

Why I like oil as a long-term investment? Energy forecasters have regularly made assumptions throughout the past year as the fast-changing economic landscape altered consumption patterns and will send crude oil price high above $145 a barrel. This is very optimistic yet I do believe solid gains will come from now and year-end. More prospective good news came last week by the U.S. Energy Information Administration and the International Energy Agency who overlook and analyze oil prices in the global landscape. They expect oil demand to spring back with a resurgence of about 940,000 barrels a day in 2010 and maybe even as high as a 1.4 million barrel-a-day demand rebound. Reading last months OPEC reports, they stated that the worst was over in the oil markets. They are very bullish about the prospective of the industry leading into 2010, as U.S. consumption is expected to rebound somewhat and consumption in emerging markets is supposed to rebound substantially. While most U.S. based Oil Companies expect profit drops of around 65% in 2009, I see it rebounding over 65% in 2010 and higher based upon higher projected pricing due to improved long-term economic outlook and new project start ups that have helped boost the upstream in the gas and oil volume. The main determinant to the oil recovery is the pace of how our economy continues to rebound. The stronger our economy becomes, the stronger the oil markets become. One large effect by the stagnate economy is the how the global credit crunch is making it hard for many companies to expand. One other concern many people have is the growing concerns in whether Iran’s unrest will cause a superficial spike in oil. This is not a worry at all as Iran needs the oil revenue in order to allow its economy to survive, for more reassurances, read my recent article Will Iran’s turmoil bring higher oil prices?

Moving on, many of you are wondering where to invest within oil stocks? Strong oil play are Chevron (CVX) which will continue to grow due to its acquisition in 2005 of Unocal and its advanced development of successful worldwide projects. ConocoPhillips (COP) who is holding a strong array of oil positions boosting its market-share, Exxon Mobile (XOM) who continues to dominate the sector by its shear size, Noble Corporation (NE) who’s revenue stream is safe and strong due to its large amount of contract backlogs, Total SA (TOT) who’s strong portfolio bodes well for the future and Transocean (RIG) who is a solid deep-water oil play. I also remain bullish on global oil corporations like China’s Petrochina (PTR) and Brazil’s Petrobras (PBR).  Both are plays on oil’s long-term secular growth and two of the world’s three most dynamic markets, India being the other emerging global dynamo.