Investing in Oil
Oil prices recently have skyrocketed due to tensions in the Middle East and rumours of dwindling supplies in the USA, petrol is now over £1.00 a litre. In Texas they have reached a record high of $98.62 per barrel of crude oil and in 2007 the price of oil has increased by 60% and that prices per barrel will reach $100 and beyond. China and India now account for 27% of the world orders for oil and as a result their economies are booming, however the demand is likely to push oil prices even higher. Some top investors believe that oil prices need to rise to $150 before it will affect demand and investors can still make a lot of money in oil.
Bradley Mitchell, Manager of the Royal London UK Growth Fund has predicted steady increases in the price of oil and has been re-positioning his funds to take full advantage. He has invested in a company called Rockhopper Exploration which is sourcing for oil around the Falkland Islands, this firms shares have risen recently and are set to keep on doing so. There are many energy funds available for retails to invest in, such as Mick Gilligan of Killik & Co cites Investec Global Energy, some of his holding include BP and Shell, as well as the ABN AMRO Energy fund which is based in Luxembourg but is available to UK retail investors. Another company (a little more risky) is Junior Oil Trusts or JOT, the company is owned by Angelos Damaskos and buys into small oil stocks which are believed to have the potential to grow, it is also possible that they will be taken over by a large multi national corporation as a way of increasing their own oil reserves. Many of the large oil companies like Shell and BP are desperate to obtain more oil so always keep an eye on the small companies. The company JOT only buys shares in companies that have proven oil supplies.
Exchange traded fund specialist securities has six oil exchange traded commodities (ETC) these can enable investors access to the oil market. These can one, two or three year futures prices in WTI (West Texas Intermediate) in oil benchmarks. ETC’s can track the market like an index fund, but you can buy or sell them and not pay stamp duty on purchases. At present most investors can’t invest in oil futures as there is a limited market access, futures enable investors to sell something they do not actually own in the hope of making a future profit from rising/falling markets.
Tullow oil is a preferential stock it has rise 39% due to a proposed take over from Burren Energy who has increased it share price dramatically. Carin Energy is also up by 30% in the last year, an oil company called Abbot is up 13% and Hunting Group is up 33% in the last year. The bigger companies have only managed a small increase BP 6.1% and Shell 6.6% due to the growing competition.
Oil prices are up. Should you capitalize on that fact?
According to Jubak, the catalyst behind soaring oil prices is simple to explain. Just as crude oil is becoming more costly to extract and process, the three key countries that could capitalize - Mexico, Russia and Nigeria - find themselves without the money they’d need to do so! Without capital, several well-documented recent discoveries won’t do anything to alleviate the shortage.
As demand escalates, worries about oil supplies move higher, too. That’s partly because oil production in cash-strapped Russia, Nigeria and Mexico is headed down, just as it’s doing overall worldwide. industries in three key countries — Mexico, Russia and Nigeria — find themselves short of cash. And without that cash, oil production in these countries, and global oil production in general, is headed into a decline.
Take Russia who recently said that production was down 1% in the first quarter, and the Russian Energy Ministry says production for the full year could actually be lower than it was in 2007. But the IEA, in making its projections, had counted on an overall growth of 5% in Russian production by 2012 to offset big declines in older fields in the North Sea and Mexico. Plus the older oilfields are experiencing annual output declines of 4.5 million barrels a day.
UK Business Link Directory - GET YOUR BUSINESS LISTED TODAY FOR ONLY £4.00 (A business link for life!)
