Crude Oil Trading

Crude oil, also known as petroleum, is the world’s most actively traded commodity and is the source of the majority of the world’s energy. Oil is reaching into new territories today as prices repeatedly reach record breaking levels. The psychological $100 per barrel barrier has been breached and most believe that the price will continue to rise.

Source: tfc charts

Along with other Financial Institutions, Mansion House Securities still regards oil as a key growth market.

High demand is still led by the U.S. economy which currently accounts for approximately 25% of global demand. New demand is also coming from the world’s developing countries. The almost unprecedented growth of countries such as China and India is fuelling demand for petroleum not only in industry but in the rapidly expanding middle classes who demand more westernised lifestyles and automobiles.

Pricing pressure remains strong, with 2.7% annual increases in demand predicted for Non-OECD Asia alone as well as the already robust long term growth in the OECD nations. Prices of over $100 per barrel may become the norm and as any disruption in supplies or even the threat of disruption causes large price spikes consumers may well need to become accustomed to these high prices.

When you take all of this into account and add the Hubbert Peak Theory that we have reached the peak of oil production from conventional sources such as the large oil fields in the Middle East that are comparatively easy to drill. It becomes apparent that smaller exploration companies can concentrate their efforts on smaller fields which could have significant growth potential as the viability of those smaller fields increases alongside the increasing price of oil.

It therefore seems that oil prices will stay high for some time to come and with many energy companies today posting record profits, the previously uneconomically viable oil projects become increasingly attractive.