It is once again time to start thinking about what some of the major market themes are going to be in the year ahead. In previous articles, we’ve highlighted some of the ETFs that we have been buying in the energy sector, which have mostly been centred around exposure to oil services, energy production and uranium. We believe that given the supply dynamic in the oil market, oil, natural gas and energy in general are going to be big themes in 2021. Therefore, in this article, we are going to take a closer look at the energy market, and one individual company that we think is going to benefit from a return in energy demand as the world comes out of the global Covid-19 slowdown.
Let’s start with oil. As always, prices are driven by supply and demand. This is no real surprise as this is how the price, or value of just about anything, is determined. At present, demand for oil is very subdued due to the impact that the Covid-19 pandemic has had on the global economy. Countries locked down and traditional economic activity ground to a halt. This created an abrupt and drastic reduction in the demand for oil, with some spectacular consequences. We saw oil futures contracts trade at negative prices. Traders were forced to pay others to take oil off their hands in a bid to avoid the storage costs associated with keeping millions upon millions of barrels of oil in container ships, floating around the world because there was just simply nowhere to store it.
We think, though, that as we humans start to develop herd immunity against Covid-19 and the progress being made towards an effective vaccine and the global distribution thereof, demand for energy – and specifically oil and natural gas – will rebound in the coming year.
This story is from the 26 November 2020 edition of Finweek English.
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This story is from the 26 November 2020 edition of Finweek English.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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