Oil Investing: 5 Things To Expect In 2014

oil-etfGarrett Baldwin: The global oil market in 2013 was dominated by geopolitical disruptions, a huge boom in U.S. domestic production, and double-digit gains for energy investors. Energy stocks (NYSEARCA:XLE) rose about 18% in 2013.

This year’s gains should be even better, especially if investors follow the five biggest oil investing trends of 2014.

Just look at what’s happening in the United States…

The U.S. Department of Energy predicts that the boom in domestic oil production is going to reach levels not seen in more than 50 years by 2016. In fact, the United States is expected to add 1 million barrels in additional capacity by the end of next year, another reason why the United States will remain the world’s leading oil-producing nation.

So, what about the rest of the world? Hundreds of factors will influence the global oil markets in 2014, but no trends are bigger than these five.

Here’s a look:

2014 Oil Investing Trend No. 1: The Texas Oil Boom Continues

Texas is the place to invest if you’re looking to capture a reliable stream of energy profits in the year ahead.

Oil production in the Lone Star State increased another 18% in 2013, which followed a 35% increase in 2012. The state’s total share of U.S. oil production has now gone from 18% in January 2013 to 40% today. The United States is now the world’s largest oil producer, and Texas oil development has dominated the production boom.

In 2014, investment in Texas oil is only going to accelerate. Domestic production in other states is currently being hindered by infrastructure problems, and, of course, higher taxes. Tack on the favorable investment environment, vast shale fields, and proximity to refineries, and you’ve got yourself a nice big source of profits.

Investors should target midstream pipeline companies that provide producers greater access to the Gulf Coast refinery network and producers in the Eagle Ford and rapidly developing Permian shale fields.

2014 Oil Investing Trend No. 2: Renewed Iranian Capacity a Welcome to Global Markets

The Iranian appeasement over its nuclear program will facilitate millions of new barrels of oil each day entering the market, creating temporary concerns about over-supply.

Recently, at the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Iranian Oil Minister Bijan Namdar Zangeneh announced that the nation was “technically ready” to begin production of 4 million barrels per day (bpd) when sanctions end in the summer months of 2014. That will have a profound impact on the global markets, particularly for global Brent crude prices.

Sanctions by United States and European Union on Iran’s energy sector prohibited western energy firms from interacting with Tehran. It led to a reduction in Iranian exports from 2.5 million barrels per day to a little less than 1 million. Now, that’s set to change the global market fast.

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