When it comes to investing in the energy sector, especially crude oil, an investor can never have too much additional info on the comings and goings of the daily energy market and the price of crude oil. However, all the information in the world has not prepared investors for a market that simply defies logic. For the past few years, the energy sector, which is the sector most dedicated to oil, has done exactly that.
How products typically work out in terms of price has everything to do with demand. The higher the demand is for a particular product, the higher the price for the product will be. This has worked in the past not only for a commodity like oil, but for virtually any product that is provided to the consuming public by a manufacturer or another corporation. It is also one of the reasons why the oil market has been so hard to predict.
Experts all agree and the numbers bear out that the demand for crude oil and refined crude oil that will be turned into petroleum products has never been higher. China looks to continue their high demand for crude oil materials and, in the future, it’s expected that India will also be a significant consumer of petroleum-based products.
In addition to all of this, production of crude oil and petroleum products has decreased. This has been balanced out somewhat by large strategic reserves that many of the larger countries throughout the world have put into place to stabilize markets when production is decreased. However, even with high demand and low production, oil prices continue to fall. While the oil prices are off their lowest price, the price per barrel of oil is still significantly lower than it should be given lower production and higher demand.
This sort of thing can be hard for investors to get their heads around, and it only increases the difficulty of having any sort of success in the energy sector when it comes to investments. Most investors understand that the energy sector is perhaps one of the most challenging investments that can be made. However, when a commodity does the unthinkable and decreases in value even though demand is through the roof but production is lower, it can leave many investors wondering what could possibly be next.