Six reasons why oil prices reached new 2016 highsBy STEVE AUSTIN for OIL-PRICE.NET, 2016/05/11

Crude oil was at a 13-year record $25 low in mid-January 2016 and has soared more than 70 per cent since. The battle is on again. We are talking about the mighty forces whipping up the oil prices. How does the investor work out where the oil price will go? Ultimately, you have to make your own forecasts, at least on the general, long term direction of oil prices – short term movements tend to be driven by news stores on the day. In particular, you need to take into consideration the following dimensions:

Supply and demand: if producers are outstripping demand, prices will fall and if there is a shortage of oil, prices will rise.
Political events: a war, rebellion or political uncertainty affecting major oil producers may prevent those countries from producing and selling, reducing the supply of oil.
Economic growth: if demand is expected to grow faster than production, excess supply will be soaked up and shortages will arise.
Related markets: the futures market, availability of transport, currency rates and the cost and of extraction equipment and labor can all affect the price of oil.

We took these factors into consideration when assessing six reasons for the recent rise in crude oil prices. Will this rally continue, or has the price peaked?

Weaker dollar raises oil prices

The market price of crude oil is valued in US dollars. Therefore, when the oil price falls or rises, you also need to look at the value of the dollar against a range of currencies. If an oil refinery in China needs to buy crude oil, it has to convert its income, derived in the local currency, Yuan into dollars. An oil producer, such as Saudi Arabia, needs to convert its income into the local currency, the Riyal in order to cover its costs. Large buyers go direct to suppliers in order to get a good price for their oil. China is particularly adept at this practice and has written up agreements to pay in its own currency for crude oil, rather than in dollars. So, if the value of the dollar falls by 10 per cent, the contract price of those agreement rises by 10 per cent, even though it hasn’t changed at all in the contract currency.

In fact, this phenomenon is notable in all commodities priced in dollars – steel, copper, gold, and silver have all experienced price rises in 2016. This is not because there is a shortage in those commodities; it is just because the currency in which they are priced has fallen. Continue reading →

50 dollar oil

For the first time in over six months oil prices rose to $50 per barrel. Brent crude moved up to $50.19 during morning trading on May 26, the first time that it has hit that point since last November.

The gains add further momentum to a streak that has seen Brent and WTI gain more than 80 percent in value since touching lows in early February at $27 per barrel. For the past few weeks, oil prices bounced around a ceiling at $47 to $49 per barrel, sputtering and struggling to break through that key threshold.

But major supply outages in Canada from the wildfires around oil sands sites in Alberta knocked more than 1 million barrels per day of oil production offline for several weeks. Militant attacks on pipelines in Nigeria has disrupted an additional 800,000 barrels per day. U.S. oil production is down about 500,000 barrels per day since the start of the year, and outages from several Latin American oil producers have also contracted the supply overhang.

FOC-LOGO-250w[1]Fossil Oil Company is interviewing for a college student intern who is looking for a summer internship for approximately 20 hours a week. We are flexible with your summer school schedule.  Job description would include basic administration duties such as filing, sorting, copying, help with incoming phone calls, running errands, etc. We are located in the West Chase District at Wilcrest Dr. and Westheimer.

For more information, please call us at 713-978-7986 or email your resume and references to Sharon Kittler at sharon@fossiloil.com.

barrell of oilThe price of West Texas Intermediate (WTI) finally found the bottom in February for this oil price cycle. It won’t be straight up from here, but with global supply & demand heading toward a balance by yearend, we should see higher oil prices.

Later this week, the International Energy Agency (IEA) will publish their monthly Oil Market Report. In their April report, IEA forecast an increase in demand for hydrocarbon based liquid fuels (primarily made from crude oil) of 1,800,000 million barrels per day from the first quarter to the third quarter of this year. If that happens, the global oil market will be back in balance.

On April 25th, Terry Starling from Raymond James presented his firm’s official oil price forecast for 2016 and 2017. Like IEA, Raymond James predicts a significant tightening of the oil market this summer. They believe WTI will reach $50/bbl. by the end of June and spike to $70/bbl. in late 3rd quarter.

For over a year, crude oil prices under $60/bbl. are unsustainable. We’ve seen an incredible decline in drilling activity that is going to result in an acceleration of Non-OPEC oil production declines that began a year ago. The number of rigs operating in North America is now at the lowest level since Baker Hughes (BHI) started tracking it over 70 years ago.

Keep in mind that the United States and Canada are not the only two countries where oil production has rolled over. Oil production in Venezuela was down 188,000 barrels per day year-over-year in the first quarter due to natural declines and an economic crisis (caused by low oil prices). Latin America on the whole lost 441,000 barrels per day in the first quarter. We’ve seen many deepwater projects cancelled, enough to all but guarantee an oil shortage in 2018.

 

There are many reasons people invest in oil and gas, and profits are generally at the top of the list. When you invest with an independent oil company that has a history of successful drilling, the chances of profits are pretty high. But what a lot of people don’t think about when they think about investments in gas and oil are the oil and gas tax benefits that come along with those profits.

Depending on your income bracket, your other investments and all kinds of other factors, the oil and gas tax benefits may be one of the main reasons you need to consider working with Fossil Oil Company. Many times people have financial advisors or tax accountants who watch the money coming in and the money going out and they can tell you whether your investments are doing you any good when it comes to tax benefits. But sometimes people don’t think about investing in oil and gas as a way to get the most benefit on their end of the year taxes.

We’d like to invite you to talk to the team at fossil oil and discuss the advantages of putting your money into an investment with an independent oil and gas company as opposed to investing in the big oil companies through stocks and bonds. Although we can give you examples of what accredited investors have reported to us about tax advantages, it is not our business to give you tax advice. But what we can tell you is that you really should talk to your financial planner or tax advisor about the oil and gas tax benefits that might be important to your bottom line when it comes to tax season. So why not start out be talking to the team at Fossil Oil at 832-919-6459 and then check out the info with your financial advisors. We’d like to think we can help you expand your income when you work with our team of oil and gas experts.

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