Big Oil Traders See Losses and Warn of Oil Pricing Slump
Shell and BP both saw losses at the end of 2016. These two companies are known for their gasoline products, but both are major investors in the oil futures industry. Both companies agree that pricing for oil futures isn’t looking too promising for the near future. Instead, they are warning that traders shouldn’t look to oil for hefty profits in the same way that they have in the past.
Contago Deals Aren’t Golden Right Now
Investors have gotten accustomed to the cash-and-carry contango form of trading that has been earning easy profits recently. With the decrease in supply, investors are finding that there isn’t any real money to be made in the contango system of buying oil now for spot prices and selling it on futures contracts. Shell and BP warn that this lack of profit is something that investors should expect.
Long-Term Investors Aren’t Concerned
Even though the contango system is flat right now, long-term investors aren’t concerned. These investors don’t mind hanging on to their investments as the oil market keeps strengthening. When you compare the price of crude right now to the price last year, you can see why. A year ago, crude was around $30 per barrel. Now, crude is hovering around $55 per barrel.
Looking to the Future
Investors should expect some fluctuations in crude prices. The current oil pricing slump for futures is likely going to continue as long as the OPEC and non-OPEC cuts are in place. For investors who are willing to hold on to their investment long term, there isn’t any reason for concern about the pricing slump.
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