Crude Oil prices soaring above 1oo dollars per barrel is of real concern for global investors as high crude oil prices effect the current account deficit & finally effect the interest rates & the economy.
Why oil is boiling????
1. Supple Side Factors
The refining space has been getting a sense of over capacity for a couple of years in the wake of global slowdown. As a result of it the refineries margin have been down
2. Demand side factors
It is very important to note that real demand of oil is boiling due to high industrialisation activities in the developing nations like China which is growing @ 9.5% per annum and also due to rising demand from India. I read it somewhere in a magazine that oil demand 3 years back for the world was some 84.5 million barrels & now it is around 88. The supply seems to be case or rather reduced because of the Libya crisis.
Secondly, there is also some speculative demand. Two rounds of quantitative easing in the US & loose monetary policy in most of the nations across the globe have created excess liquidity & some part of which is used for speculative gains in crude oil prices.
The weakness seen in the US dollars is also holding a strong reason for rising not only crude oil prices but the over all commodity pack
Companies to benefit from rising Oil prices
1. Cairn India will certainly benefit from high crude oil prices, though uncertainity over its deal with Vedanta isnegatively impacting its stock price
2. ONGC, a oil exploration company will also benefit from high oil prices, the subsidy to downstream companies will also increase by a good number
Regards
Mayank Gupta
mayankportfoliomanager@yahoo.com
http://www.wealthbazaar.in/
Why oil is boiling????
1. Supple Side Factors
The refining space has been getting a sense of over capacity for a couple of years in the wake of global slowdown. As a result of it the refineries margin have been down
2. Demand side factors
It is very important to note that real demand of oil is boiling due to high industrialisation activities in the developing nations like China which is growing @ 9.5% per annum and also due to rising demand from India. I read it somewhere in a magazine that oil demand 3 years back for the world was some 84.5 million barrels & now it is around 88. The supply seems to be case or rather reduced because of the Libya crisis.
Secondly, there is also some speculative demand. Two rounds of quantitative easing in the US & loose monetary policy in most of the nations across the globe have created excess liquidity & some part of which is used for speculative gains in crude oil prices.
The weakness seen in the US dollars is also holding a strong reason for rising not only crude oil prices but the over all commodity pack
Companies to benefit from rising Oil prices
1. Cairn India will certainly benefit from high crude oil prices, though uncertainity over its deal with Vedanta isnegatively impacting its stock price
2. ONGC, a oil exploration company will also benefit from high oil prices, the subsidy to downstream companies will also increase by a good number
Regards
Mayank Gupta
mayankportfoliomanager@yahoo.com
http://www.wealthbazaar.in/
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