OIL STOCK SALES DEFINED
Given all the news we hear regarding the oil market, it would be nice to have a glimpse of what all these figures mean, especially for investors. Currently, oil is seen to be bouncing back after its 70 percent decline since the start of 2014. As of of June 30, oil is up by 20 percent despite having a shaky start with a 25 percent drop during the first two months of the year.
Back to the records, what do all these increases and and deteriorations represent? To give a good start, let’s begin with one of the most commonly heard word--production.
This year, countries around the world have seen a surge in production, which is now in a 44 year high, producing 9 million barrels per day. The US in particular has accounted for majority of this boost with an 89 percent increase starting from 2008. The Organization of Petroleum Exporting Countries (OPEC) has also seen a rise in manufacturing. This increase in production results to a reduction in prices, and urges more drilling, bolstering supplies for the upcoming years.
On to the next term, secondary offerings. These are the release of a new stock available for purchase after a company has already issued its initial public offering (IPO) and are usually made for strengthening capital. Energy companies have been using this to build their capitals, amounting to $19 billion in 2015. Market participants continue to rely in energy sectors, despite it wiping out some companies’ funds.
Acquisitions of land are also becoming popular for many oil companies as investors see this as a move towards growth. Suncor Energy Inc. has recently raised up to $2.2 billion to finance its stake in the Syncrude project, a Canadian oil venture. Another company, QEP Resource Inc., also bought almost ten thousand of acres in Permian Basin land for about $600 million, setting up a record of the highest paid property in the land.
Lastly, as investors’ confidence in shale increases, the product has been enjoying being in the bull market. Shale is an organic sedimentary rock containing kerogen, while bull market can be defined as a market wherein prices of securities are expected to increase. Aside from investors’ rising preference for shale, oil producers believe that investing in it can boost productivity through a hike in their net income despite lower prices.
While positive records on oil sale are prevailing, experts still warn that prices remain low compared to their peak value in 2014 and global supply is exceedingly high. According to them, it would be wiser if investors will postpone their investments for now, in order to prepare for the future.
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