Why Oil Prices Are Down in 2016
The biggest reason oil prices are at 13-year lows is concern over OPEC adding to the global supply glut.
Yesterday, the International Energy Agency (IEA) released a bearish monthly market report for January. The agency concluded yearly global demand growth for oil will stay under 1.2% due to soaring OPEC production. Cartel-wide output jumped 280,000 barrels to a total of 32.6 million last month.
The report caused WTI futures to drop 5.9% to $27.94 yesterday (Tuesday) as investors’ hopes of OPEC and non-OPEC cooperation deteriorated.
“Persistent speculation about a deal between OPEC and leading non-OPEC producers to cut output appears to be just that: speculation,” the IEA report stated.
But that stagnated demand growth is set to increase through next year. The U.S. Energy Information Administration (EIA) expects global consumption to rise from 93.8 million barrels a day last year to 95 million this year. And the agency also expects that number to hit 96.5 million through 2017 – marking a 2.9% increase from 2015.
This long-term demand growth will reduce the worldwide glut and raise prices to the $70 range by next year.
And the slow and steady price rebound will offer us some strong profit opportunities in the meantime…
“We are not racing back to $100 a barrel oil,” Moors said in December. “But we certainly do not need triple-digit oil to make some nice investment returns, especially in a sector that has been so oversold.”
But you have to know which oil stocks to shy away from and which ones to embrace during this volatile price climate.
Here are the oil stocks you should avoid – and the one type of oil stock you should invest in this year…
