Geopolitical Tensions and Rising Oil Prices: Investment Opportunities and Forecasts for the Energy Sector. Shannon Stapleton/Reuters
Geopolitical tensions are driving up oil prices.
OPEC production cuts and strong demand in the US are also contributing to the price rise.
Some ways to invest in the energy sector are through individual oil companies. Experts name Exxon Mobil, Chevron and Shell, among others.
This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by a real editor.
Geopolitical tensions are high: the Russian invasion of Ukraine continues. Israel continues its attacks against Hamas in the Gaza Strip. Iran fired missiles at Israel last week and is funding anti-Israel military groups in Palestine, Lebanon and Yemen. And China continues to threaten military action in Taiwan.
Oil prices are rising because of these conflicts and the uncertainty they cause. The conflicts could affect the offer.
OPEC is reducing their production
OPEC, a group of oil-producing countries, is also cutting production to support prices.
The “Organization of Petroleum Exporting Countries” (OPEC for short) is an international organization founded in 1960 and based in Vienna. The organization currently has twelve states: Algeria, Equatorial Guinea, Gabon, Iran, Iraq, the Republic of Congo, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates and Venezuela. Five OPEC member states (Saudi Arabia, Iran, Kuwait, Venezuela, United Arab Emirates) are among the ten largest oil producers in the world. Overall, OPEC member states produce approximately 40 percent of global oil production and hold three quarters of global oil reserves.
Brent crude oil at times cost more than $92. However, after the weekend, the price of the commodity fell to below $90. A barrel of oil is approximately 159 liters in most units of measurement. Since the end of March alone, prices have risen by more than 5 percent.
With global tensions looking unlikely to calm down in general in the near future, some experts say oil prices could continue to rise. Additionally, the sector is undervalued, according to LPL Financial.
“Attractive valuations”: assessment by LPL chief strategist Quincy Krosby
“Valuations are exceptionally attractive with stable and reliable cash flow margins in most quarters,” said Quincy Krosby, senior global strategist at LPL Financial in North Carolina, in a statement on Monday (April 15). This would mean that these companies are likely to generate regular income, which could be attractive to potential investors.
However, according to him, investments in the sector remain cautious as the price of crude oil is still the main factor determining investor interest. Because of this reluctance, oil companies are underweight compared to other sectors or are viewed as “unpopular”.