MK: Crude Oil Might Inch Lower from the Current Levels
Crude might inch lower
Crude oil might inch lower from the current levels as of January 6, 2016. The reasons are future possibilities of diminishing demand from various segments. Aviation, road transport, and domestic heating requirements accounted for a significant amount of the crude oil demand. The fuel cell first generation car has already been launched. It’s just a matter of time and technology before it’s fully applicable to trucks and other large vehicles. Countries like India (INDY), China (FXI), and the US (SPY) have abundant sunshine. They might use solar panels to meet their domestic energy requirements. Solar energy could also be stored in a fuel cell for other requirements. India and China alone represents more than 28% of the world’s population. The US is the biggest crude oil consumer.
The aviation industry might be the only place where crude oil demand stays the same. In this series, we’ll discuss the impact of renewable energy on crude oil. The destabilization in the Middle East might be related to the development of renewable energy technology across the world. We’ll also discuss the moving averages and analysts’ estimates for upstream and downstream companies like ConocoPhillips (COP), Tesoro (TSO), and EQT (EQT).
Crude oil and investments
To help investors understand how the crude oil market fell, the above graph shows how United States Oil (USO) performed in the last four years. In the next part, we’ll discuss why prominent OPEC (Organization of the Petroleum Exporting Countries) nations like Iran and Saudi Arabia may not cut production.
OPEC’s (Organization of the Petroleum Exporting Countries) outlook was released in December 2015. It included facts about diminishing oil demand by 2040. By 2040, oil might have alternatives. OPEC’s members must plan to raise production in order to cash out the oil before the demand dries up. Since most of the Middle East economies depend on oil, they can’t afford to keep high reserves in the future when the demand for oil isn’t significant. Other non-OPEC energy exporting countries like Brazil (EWZ) and Russia (RSX) will be impacted as well. They might not cut their crude production either. It simply implies more oil in the market and lower crude oil prices. Gazprom PAO (OGZPY) and Lukoil (LUKOY) represent large-capped Russian ADRs (American depositary receipts). Petrobras (PBR) represents large-capped Brazilian ADRs in the oil and gas sector.
Shale is abundantly available on the planet, although the technology isn’t highly developed outside the US. OPEC’s current price war with US shale oil producers is already backfiring. Shale oil producers are facing financial difficulties. The US is a net importer of crude oil. It might not stop producing shale oil. The shale oil producers are strategically important for the US to reduce its dependence on other oil exporters.
Crude is also associated with terrorism because most terrorist activities arise from the Middle East. Most of the developed and emerging economies are net importers of crude oil. As the crude supply becomes volatile, it also impacts their economies. In the next part, we’ll discuss how renewable energy growth can intensify the geopolitical tension in the Middle East.
