Profit Confidential details why the future upside for oil appears to be low, and why oil market investments don’t appear to be facing a similar problem.
www.ProfitConfidential.com), an e-letter published by Lombardi Publishing Corporation, a 28-year-old consumer publisher that has served over one million customers in 141 countries, is releasing its expert opinion on the oil market, suggesting that while the upside for oil appears limited in the coming years, investments in oil markets aren’t.— Profit Confidential (
“Oil prices have rallied back to the $100.00-per-barrel level on some near-term supply and inventory concerns. While the upside move is rewarding the buyers of oil stocks, it doesn’t appear as though oil prices are set for an extended rally,” says Profit Confidential’s financial expert, George Leong. “The chart of the West Texas Intermediate (WTI) crude oil shows oil prices bouncing higher after the formation of a bullish double bottom. And while oil prices can head higher, it doesn’t appear as though any moves will be sustainable.”
Leong explains that the catalyst for higher oil prices has more to do with tight inventories driven by a rise in demand. The inventory of oil contracted by 1.5 million barrels per day from October to December 2013, according to the International Energy Agency (IEA). The IEA suggests the demand for oil will rise by 50,000 barrels per day to 1.3 million barrels in 2014. (Source: Johnson, C. and Sheppard, D., “Robust demand tightening oil market, IEA says,” Reuters web site, February 13, 2014; http://uk.reuters.com/article/2014/02/13/iea-idUKL5N0LI1SL20140213.)
“If this estimate pans out, oil prices could edge higher and hold above $100.00, but it’s doubtful the move will last that long,” he adds. “Now, if China jumps out of its sluggish growth and Europe can drive its economic renewal, then we could see brighter prospects for oil prices.”
On the supply side, America is relying less on the Organization of the Petroleum Exporting Countries (OPEC) and foreign oil as American oil companies continue to squeeze more oil out of the ground, specifically shale oil. According to Leong, there may even be a time down the road when the U.S. will not have to buy any OPEC oil, especially if the country can increase its shale oil, grow its wind and solar energies, and increase the flow of friendly oil from the Tar Sands in Canada. The major Keystone pipeline project has passed environmental assessments, but it will need the approval of the government.
“A look at the futures oil market indicates oil prices are likely to stay in the $100.00 range and lower over the next few years unless we see a geopolitical upheaval in the Middle East, in particular with Iran and Syria,” he observes. “More specifically, oil futures indicate that oil prices will eventually move back down towards $94.00 by the end of 2014, followed by a move to below $90.00 in 2015 and less than $80.00 by 2018.”
“So while I think oil will find it difficult to move much higher, there are still some good buying opportunities for oil stocks,” Leong concludes. “Going forward, investors might be wise to focus on the oil services and oil companies that are involved in the fracking market.”
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.lombardipublishing.com.
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