The US Has the Most Oil Now - July 24, 2016
“US oil reserves surpassed those of Saudi Arabia and Russia”, reported Financial Times. This again may have an effect on the price of crude which already hit record lows the last years. But there’s a chance that it will rise, so oil still might be a good investment.
FT based its article on a new analyses made by Rystad Energy. They conducted a worldwide analysis over three years to find out which country has the most oil in reserves. They figured that the US can recover 264bn barrels of oil from existing fields, discoveries and yet undiscovered areas, while Saudi Arabia and Russia has 212bn and 256bn barrels respectively.
The reason behind these great changes is that “hydraulic fracturing and other new technologies (…) have helped the US unlock vast reserves”. While the US was import dependent in the past, these new technologies and possibilities helped them to reach greater oil independence.
Now the US has great amounts of shale oil which is becoming more economical to produce every day. The production price halved in just two years, now it’s $40 to produce a barrel. But still, Saudi Arabia can produce a barrel of oil for $10 so there’s still a long way to go for shale oil to be as cheap as conventional oil.
All these events are pushing (or keeping) the prices lower. There was even a huge shock when prices fell from $110 to $25 in just years. All in all, prices went higher with time, now crude worth $45 a barrel. This is in favour of the EU and the US since Western sanctions against Russia are helped by low oil prices. Falling prices already hurt several economies, not just Russia but Kazakhstan, among others, as well. A year ago, in August we already wrote an analysis on the subject, and things haven’t really turned around since then.
Nonetheless, even with these prices, oil companies stick to one thing all the time: paying dividends. What’s more, they are raising payments to stockholders in the last 33 years in a row now. This is not surprising, since investors in oil companies are expecting decent dividends, and that still makes stocks of oil companies a good choice when investing. With proper diversification, of course. And there’s even a chance of further raise to $50-60, and that would also help oil companies with their financial situation.
Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instruments. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities also offers Profit Max which has a highly diversified, professionally assembled portfolio.