Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Will the Fed’s Interest Rate Tightening Trigger Another Financial Crisis? - 18th Jul 18
Stock Market Investor “Buy the Dip” Mentality is Still Strong, Which is Bullish for Stocks - 18th Jul 18
Stock Market Longer-Term Charts Show Incredible Potential - 18th Jul 18
A Better Yield Curve for Predicting the Stock Market is Bullish - 18th Jul 18
U.S. Stock Market Cycles Update - 18th Jul 18
Cayton Bay Hoseasons Caravan Park Holiday Summer 2018 Review - 18th Jul 18
What Did Crude Oil - Platinum Link Tell Us Last Week? - 17th Jul 18
Gold And The Elusive Chase For Profits - 17th Jul 18
Crude Oil May Not Find Support Above $60 This Time - 17th Jul 18
How Crazy It Is to Short Gold with RSI Close to 30 - 16th Jul 18
Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18
Stock Market Uptrend Continues, But... - 16th Jul 18
Emerging Markets Could Be Starting A Relief Rally - 16th Jul 18
(Only) a Near-term Stock Market Top? - 16th Jul 18
Trump Fee-Fi-Foe-Fum Declares European Union America's Enemy! - 16th Jul 18
US Stocks Set For Further Advances As Q2 Earnings Start - 15th Jul 18
Stock Market vs. Gold, Long-term Treasury Yields, 10yr-2yr Yield Curve 3 Amigo's Update - 15th Jul 18
China vs the US - The Road to War - 14th Jul 18
Uncle Sam’s Debt-Money System Is Immoral, Tantamount to Theft - 14th Jul 18
Staying in a Caravan - UK Summer Holidays 2018 - Cayton Bay Hoseasons Holiday Park - 14th Jul 18
Gold Stocks Summer Lows - 14th Jul 18
Trump US Trade War With China, Europe Consequences, Implications and Forecasts - 13th Jul 18
Gold Standard Requirements & Currency Crisis - 13th Jul 18
Focus on the Greenback, Will USD Fall Below Euro 1.6? - 13th Jul 18
Stock Market Outlook 2018 - Bullish or Bearish - 13th Jul 18
Rising Inflation is Not Bearish for Stocks - 13th Jul 18
Bitcoin Picture Less Than Pretty - 13th Jul 18
How International Observers Undervalue the Chinese Bond Market - 13th Jul 18
Stocks Trying to Break Higher Again, Will They? - 12th Jul 18
The Rise and Fall of Global Trade – Redux - 12th Jul 18
Corporate Earnings Q2 2018 Will Probably be Strong. What This Means for Stocks - 12th Jul 18
Is the Relative Strength in Gold Miners to Gold Price Significant? - 12th Jul 18
Live Cattle Commodity Trading Analysis - 12th Jul 18
Gold’s & Silver’s Reversals’ Reversal - 12th Jul 18
The Value of Bitcoin - 11th Jul 18
America a Nation Built on Lies - 11th Jul 18
China, Asia and Emerging Markets Could Result In Chaos - 11th Jul 18
Bullish Gold Markets in the Big Picture? - 11th Jul 18
A Public Bank for Los Angeles? City Council Puts It to the Voters - 11th Jul 18
Yield Curve Inversion a Remarkably Accurate Warning Indicator For Economic & Market Peril - 11th Jul 18
Argentina Should Scrap the Peso and Dollarize - 11th Jul 18
Can the Stock Market Close Higher For a Record 10th Year in a Row? - 11th Jul 18
Why Life Insurance Is A Must In Financial Planning - 9th Jul 18
Crude Oil Possibly Setting Up For A Big Downside Move - 9th Jul 18
BREAKING: New Tech Just Unlocked A Trillion Barrels Of Oil - 9th Jul 18
How Trade Wars Penalize Asian Currencies - 9th Jul 18
Another Stock Market Drop Next Week? - 9th Jul 18
Are the Stock Market Bulls Starting to Run? - 9th Jul 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Why China and Saudi Arabia Mean You Should Bet on Higher Crude Oil Prices

Commodities / Crude Oil Feb 21, 2013 - 03:36 PM GMT

By: Money_Morning

Commodities

Tony Daltorio writes: As Money Morning Global Energy Strategist Dr. Kent Moors pointed out not long ago, the sky is not falling on oil prices despite what the doomsayers believe.

There are two crucial countries that are behind the recent rise in oil prices: China and Saudi Arabia.


And if these two nations keep on their current path, it will mean one thing...

Even higher oil prices in 2013. Here's why.

How China Will Move Oil Prices
China is usually the gorilla in the room when it comes to commodities demand, including for oil.

A recovery in oil demand from the world's second-biggest economy can be seen in the latest statistics from China.

The fourth quarter of 2012 saw a sharp rebound in China's thirst for oil. Demand hit a historical high in December at 10.6 million barrels a day. Demand during the summer languished at about 9 million barrels a day.

This year started strongly, too. January saw China import crude oil at the third-highest rate on record.

Oil demand for all of 2013 is expected to rise by 4.8%, according to a research institute affiliated with China's largest energy producer, China National Petroleum Corporation (CNPC). The researchers pointed to China's economic rebound as the key factor.

Analysts from Barclays in London and Singapore agree with this assessment. They are forecasting a jump in Chinese oil demand this year of roughly 5%, or an additional 480,000 barrels a day.

Lead Barclays analyst Sijin Cheng said in a recent report that "a faster-than-expected [economic] rebound could present an upside risk to that forecast." Cheng added "an upside surprise [was] more likely on balance."

Of course, China is only the demand side of the equation.

The Supply Side of the Oil Prices Equation
There is also the supply side, where Saudi Arabia continues to hold the key to the direction of global oil prices.

Last summer, when Brent crude oil prices were pushing $120 a barrel, Saudi Arabia came to the rescue and began pumping nearly 11 million barrels a day.

But at the end of 2012, thanks largely to what the Saudis were seeing from the shale oil fields of the United States, Saudi Arabia drastically cut its oil production. January saw oil production from the kingdom at only around 9.25 million barrels a day.

This move may have been an indicator that the Saudis are comfortable with oil prices at $110 a barrel versus the country's oft-repeated price of $100 a barrel for Brent crude.

The Saudis may need higher prices as Arab Spring is forcing the country to spend more on its citizens. Spending on healthcare, for example, jumped by 26% in 2012 to 12.5% of its entire budget, according to NCB Capital.

The Saudi cutbacks did serve to tighten the global oil market. According to the International Energy Agency (IEA), overall OPEC production was only 30.34 million barrels a day in January, a 12-month low.

The oil bears say not to worry, as OPEC has plenty of spare capacity that it could bring into production to lower oil prices at a moment's notice.

It is true there is plenty of spare capacity - more than 4 million barrels a day in January. But how much of that can really be brought online?

The security concerns in northern Africa should raise a red flag about that.

An analyst at the IEA, Antoine Halff, told the Financial Times, "If capacity at some OPEC countries were to be disrupted, you could find spare capacity in other member countries eroded very quickly."

Profiting from Higher Oil Prices
Putting the entire picture together - supply and demand -means the most likely path for oil is a grind higher as global economic activity picks up in 2013.

There are numerous ways for investors to play this trend, including with many U.S. shale oil plays.

For investors interested in a purer play on the oil price itself, there is an exchange-traded fund that fits the bill. It is the United States Brent Oil Fund (NYSE: BNO).

This ETF tracks the movements of Brent crude oil. It does so through the ownership of ICE Brent crude oil futures. For tax purposes, BNO is considered a limited partnership.

For more info on betting on higher oil prices in 2013, check out this report from our energy expert Dr. Kent Moors.

Source :http://moneymorning.com/2013/02/20/how-china-and-saudi-arabia-mean-you-should-bet-on-higher-oil-prices/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules