Are Oil Stocks Dangerous?

By www.ProfitableTradingTips.com

http://profitabletradingtips.com/profitable-trading-tips/are-oil-stocks-dangerous
OPEC has announced that its members
will reduce production by as much as
ten percent and oil stocks went up.

market watch says to disregard this
news because oil stocks look
dangerous still.

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it’s been a wild ride where crude is
concerned, with prices soaring to $49 a
barrel after news that opec is going to
indeed deliver a production cut.

no sector has more riding on the deal
than energy stocks, which are leaping
ahead this morning.

thanks to a recovery in crude prices, the
energy select etf xle, +5.36% has risen
17% year to date, though it’s off 2.6%
this week.

it stands to reason that an oil pact
would make those gains sweeter.

but our call of the day says not so fast –
oil stocks are “dangerous” to own, no
matter what kind of short-term pop they
might get from opec news.

market watch is basing their opinion on
technical patterns.

Are oil stocks dangerous from a
fundamental point of view?

If OPEC does not follow through with
production controls their total
production will continue to climb in
the face of weak global demand for oil.

And OPEC is famous for deciding to cut
production and having its individual
members cheat on the side.

Which Oil Stocks?

There are big oil stocks and small
drilling companies.

There are the people who make
submersibles to deal with issues at
great ocean depths as drilling goes
further and further offshore.

There are the high tech fracking
operations that drove US oil production
up by 50% in just a decade and are
becoming increasingly efficient.

According to the wall street journal big
oil will start spending again in
anticipation of increased demand and
higher prices.

the prospect of rising oil prices has the
global energy industry considering a
strategy that has been unthinkable for
much of a two-year-long market slump:
making new investments.

big oil companies are moving ahead
with new spending again, says bp plc
chief executive bob dudley on the
sidelines of the oil and money
conference here.

the british oil company he heads has
taken final investment decisions on a
handful of projects this year and is
expected to approve more in 2017, he
said.

“investments are back,” mr. dudley said.
“but it’s only going to be the very best.”

Our sister site, profitable investing tips,
asks if you can make money on oil
these days.

it turns out that extraction per well is
more efficient with newer technologies
allowing extraction of twice as much oil
per day per well compared to just a
decade ago.

drilling of new wells has dropped off by
as much as 60% but current wells are
still producing.

the breakeven point for a high
producing well is $30 a barrel and $50 a
barrel for a moderate producing well.

thus a small increase in oil prices will
drive up profits for fracking operators.

when profits go up drilling for new wells
will resume.

where to make money in oil these days
with the promise of higher prices could
well be with oil drilling companies and
companies using the high tech fracking
technology.

Are Oil Stocks Dangerous?

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Are Oil Stocks Dangerous?