Oil Prices Analysis
Oil Prices Analysis
In order to have an effective analysis for oil, you need to know the variables that can affect prices. You can do your own analysis, but if you are not familiar with the various factors which may affect oil prices, you will not know the exact impacts on your decision.
Supply is the biggest contributor to oil prices. Increased supply will result in higher prices due to the demand for the commodity.
Production is also a factor in determining the amount of oil that gets produced. This is largely determined by two factors, the amount of people who want to extract oil and the cost of extracting it. If you analyze the number of wells drilled every year, the number of wells each company plans to drill and the number of years they plan to drill the wells, you will find out how many new wells will be added to the US supply over the next few years.
Also, it is necessary to analyze production. Production is the amount of oil that comes out of the ground. When the amount of production exceeds the rate of extraction, the companies with more oil will eventually have a higher price. If the rate of extraction exceeds the amount of production, it means the production is high, so the price will be low.
Another aspect is the difference between supply and demand. Sometimes, there is a fluctuation between the two. It is important to study these fluctuations. As we all know, the demand is the buyer’s price, but the supply is the seller’s price.
There are many variables that can affect these two factors, and the amount of production and demand fluctuation. A major factor is price. The higher the price, the more supply and the lower the price, the more demand there is. If the amount of production is high, the price will be high. Supply and demand will be impacted by oil and gas reserves, as well as reserve loss. How much of the current reserves is remaining? How much of the reserves are available for future use? There are various strategies that are used to estimate this information, including physical depletion rates, mining statistics, geological research and other sources.
Sometimes reserves will be depleted before additional sources can be found to replace them. This would be a good time to explore alternate sources, like gas and coal. Exploration has been the subject of recent news reports because of the lower oil prices that are occurring.
One concern that is included in reserve loss is climate change. Climate change is a factor that can be very strong, so you need to think about its impact on the reserves when doing your analysis for oil.
Research is needed for new techniques and equipment. If new techniques and equipment become available, it will help decrease the amount of drilling required to extract the oil. If the oil is not found, the remaining amount will have to be sold off.
While a lot of research has gone into these issues, the most important decision you will have to make is what you are going to sell. The time has come to decide if you will take a cut or a long position. If you take a long position, you will have to wait for a long period of time to get your profit.
When analyzing oil prices, take your time and keep in mind the time frame of the indicators, before you decide which way to go. This is just one example of how to analyze oil prices, you may need to take a look at other factors.