Provision of decades of passive income, open doors to the most attractive incentives on investments, grease to the wheel of the investment portfolio, investment in oil stocks no doubt has won the heart of investors over the years. Is this however the case in 2020? With countries on lockdown, movement halted and airline industry grounded, COVID-19 sure comes with a lot of unprecedented circumstances. The year is unfavorable for the oil and gas industry as oil prices are being battered from both sides: demand and supply. Sadly, while other sectors have risen beyond the fall, the oil and gas still remain beaten down and this might roll over to the end of the year. Does this mean there is no hope for investors in oil stocks?
Well, many countries have started lifting travel restrictions. Hence, it is safe to say the worst is over. To know more, Kelcas Corporation, a well-known oil, and the gas company explain more on what investors can do, things to consider, and the future outlook of oil stocks. Read on!
What was the Case over the Month?
Amid the COVID-19 pandemic and the economic meltdown, the oil prices begin to hit the bottom. The industry has experienced a great deal of volatility over the months and most of the companies have been hurt by the lower commodity prices. It all became clear in the report of IEA that global oil demand will fall in 2020. This comes as no surprise as global travels are limited and movement is halted. This prompted OPEC and its allies to agree to cut global petroleum output by nearly 10th. The aim is to stabilize prices in the oil markets. However, the end of April sees the US crude oil prices bouncing back to its feet despite the challenges. The crude oil stocks rose unexpectedly at the end of May after the decline in the previous period says the experts of Kelcas Corporation. Moreover, with the ease in restrictions across different countries, there is potential for growth in the coming years.
Factors to Consider before Investing are in Oil Stocks
1. Evaluate the Demand, Supply, and the Equilibrium
One of the things investors should consider is the high risk of volatility in the price. Global oil production has exceeded the demand especially in 2020. This no doubt has affected the price oil making it drop drastically in the past months. Like other commodities, the major determinants of oil prices is the supply and demand in the market. Evaluate the market equilibrium, the demand, the supply including the inventories.
2. Don’t just go for Cheap Prices
Despite the fears, concerns, and uncertainties involved in investing in the oil stocks at this period, there are still some companies holding up with diverse operations. Investors should look into the strength of the company, and how they are surviving the crisis.
3. Look out for other Economic Indicators
Investors should look into other economic indicators such as transportation, gasoline consumptions, and many more. The economic performance can help investors make informed decisions and understand if there is going to be a shift in the demand for oil and gas anytime soon.
Once the stay-at-home order is lifted and there are fewer restrictions on movement, the demand for oil is expected to rise as people will be more than eager to travel as they once did. The oil and gas industry is already on its way to recovery, although the effect of excess inventories cannot be denied. The speed to recovery however lies on steps taking by companies to deal with the challenges.
This overall outlook of oil and gas given by Kelcas Corporation can help investors to make decisions about oil stocks.