Profiting from understanding of the oil markets

oil market

123 licenses were recently awarded by the UK Oil & Gas authority to 61 companies in the 30th offshore licensing round for UK North Sea Oil drilling and exploration.

This is a significant development for the UK North Sea region, and it indicates that exploration is alive and well with plenty of new oil wells waiting to be drilled in the UK. Among the many companies that have recently won licensing are Chevron, Total, BP, Shell, ConocoPhillips and others.

UK oil & gas representative, Deidre Michie indicated that it is necessary to get production up and running before a slowdown in oil production commences after 2020. According to Bloomberg energy prices, crude oil prices are up across the board. WTI (West Texas Intermediate) crude oil is trading at $71.77 per barrel, while Brent crude oil is trading at $79.69 per barrel.

Oil prices have risen since hitting multiyear lows in 2016, as evidenced by the above charts. Crude oil prices have maintained strong growth since mid-2017, despite increased production from major OPEC producing nations, including Iran. According to the EIA (Energy Information Administration), the top producers of petroleum include the following 10 countries (2017 statistics):

  • The United States – 15,566K Barrels per Day
  • Saudi Arabia – 12,090K Barrels per Day
  • Russia – 11,200K Barrels per Day
  • Canada – 4,987K Barrels per Day
  • China – 4,779K Barrels per Day
  • Iran – 4,669K Barrels per Day
  • Iraq – 4,462K Barrels per Day
  • UAE – 3,721K Barrels per Day
  • Brazil – 3,363K barrels per Day
  • Kuwait – 2,928K Barrels per day

The United Kingdom produces an estimated 1,047K barrels per day which will be increased substantially by the recent granting of 123 licenses for UK North Sea oil drilling. According to Trading Economics, UK crude oil production has shown a sharp increase since August 2017 when it was measured at 831K barrels per day.

Since then, it has enjoyed unprecedented growth with figures of 885K BPD in September 2017, 946K BPD in October 2017, 977K BPD in November 2017, and a drop to just 739K BPD in December 2017. By January, figures spiked to 1,027K BPD. Current trends looks set for strong growth prospects now that the oil price is trading around the $75 per barrel benchmark.



Montgomery Earl James II of Olsson Capital believes that traders can benefit from diversifying their portfolios to include oil interests over the short-term. ‘As it stands, we saw traders and investors exiting oil markets en masse in recent years.

The ongoing spat between West Texas intermediate producers and Brent crude oil/OPEC producers resulted in excess capacity and price weakness. Since then, we have seen a concerted effort to bring production back into line, by reducing excess capacity and running down oil inventories.

The latest stats are heartening for oil bulls. For starters, any price above $70 per barrel is going to draw in plenty of producers, explorers, and stakeholders. This circular pattern will result in excess production to maximize revenue gains, which will then result in long-term price declines for crude oil.

We are already seeing more licenses being issued, so the short-term prognosis is a price spike and profit-taking, followed by a market correction. It is important to ride the proverbial wave while prices are high, since a correction is invariably on the way.’