Investing in Oil Firms with Competitive Advantage

The U.S. oil and gas market has been exhibiting tremendous growth, and those looking for opportunity to invest in oil markets will have to focus on competitive advantages.

Oil firms that continually seek new ways of producing this commodity closer to where the market is are worth looking into. Also, companies that take advantage of new technologies in oil exploration and drilling are good investment prospects.

Nicholas Pope, a specialist from one of the leading investment banks with headquarters in New York, said that the surge in U.S. oil supply has been growing in leaps and bounds and existing pipelines can hardly cope.

Oil companies realize this, and those who were up to the challenge early on have been using other ways to move the commodity, and have long been benefiting from it.

Some oil companies, like Continental Resources, have embraced the concept of railway systems, transporting a large chunk of its product from Bakken to the refineries on the East and West Coasts. The use of available rail systems has increased transport options as well as capacities, benefiting both the oil market and its suppliers.

Last year’s crude oil production in North Dakota reached a volume of 480,000 bpd. More than 50 percent of this was shipped through railway systems.

John Hummel of the AIS Group said that crude oil prices are expected to follow an upward trend, especially in the long term, as the need for the commodity soars. The group foresees prices will reach a ceiling of $120 per barrel.  He said that China will be the leading source of this new demand.

He added that oil firms with a competitive edge are those that apply the newest and most effective technology in releasing oil resources from the ground. Heightened drilling efficiency helps lower costs to some extent. He advised investors to watch out for these companies.

Meanwhile, Citigroup has a differing view about oil trends in the long-term scenario.  It reported that crude oil prices per barrel will end up hovering within the 70 and 90-dollar range as increased U.S. oil production puts more pressure on oil prices.

By: Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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