The past couple of years have been tough for oil markets in Asia and other countries as consistently weak pricing and rising uncertainty caused dozens of producers to declare bankruptcy and cut output. However, prices should be more stable for 2017 as OPEC has made market rebalancing agreements. Those, combined with efficiency gains and decreasing costs, means that 2017 could be the right year to invest in oil.
Declining Stockpiles May Bring Higher But Stable Prices on the World Oil Market
In November 2016, OPEC countries agreed to refocus their efforts on supporting prices by reducing output by over a million barrels a day. OPEC also formed an agreement with several non-member countries who also agreed to cut production. The goal is to reduce the surplus of oil that’s built up over the past few years, and these actions can stabilize oil prices at a higher level.
Repositioning and Getting Ready for More Growth in the Energy Sector
Before the economic downturn, many oil producers relied on high prices to encourage growth. However, as these prices become a memory, producers have worked to get costs down to a more manageable level. The efforts have paid off, and many companies are in a position to thrive at a lower per-barrel price. This transformation has been remarkable, and it’s one of 2017’s major catalysts for oil stocks.
An Increase in Shale Oil Production
Shale producers have experienced similar transformations over the past several years. Major producers halted growth efforts in 2016 to focus on cutting costs by high-grading portfolios, gaining drilling efficiencies and optimizing the completion of wells. These efforts are becoming fruitful, and companies are ready to grow at lower per-barrel rates. If prices rise, these companies have many high-return drilling spots to get oil at the higher rate.
The Takeaway for Oil Investors
Because of declining oil supplies, the market is expected to rebalance itself this year, which will stabilize prices. Meanwhile, cost cuts have put producers in a position to optimize growth at lower prices. Because of these reasons, this could be a fantastic year for oil investors who want to learn more online.