4 Industries In Focus As Oil Prices May Edge Up

President Donald Trump’s aim to reduce energy costs for Americans may be stumbling upon a new obstacle as Saudi Arabia has been slashing oil exports to the United States since September. Continuing with the trend that started two months ago, the desert kingdom is putting even fewer barrels aboard oil tankers to the United States in a bid to drive oil prices up.

Oil Prices Likely to Surge

Saudi Arabia’s November decline in the number of barrels shipped to the United States comes after a six-week oil market drop that pushed oil into a bear market.

Oil prices rose about 1% on Nov 19 amid prospects of Saudi Arabia pushing Organization of the Petroleum Exporting Countries (OPEC) along with Russia curbing supplies in an oversupplied global market toward the end of this year.

December Brent crude oil futures rose 1% from its previous close to reach $67.41 per barrel at 07:46 GMT on Nov 19 and West Texas Intermediate increased 1.4% to reach $57.22 a barrel.

Per a CNBC report, Saudi Arabia had slashed crude oil supplies to the United States last year as well in order to ramp up oil prices by curbing global saturation and decreasing output along with other OPEC member nations and Russia.

"It worked so well in 2017 for [Saudi Arabia] to cut flows to the U.S. because people could see the inventories dropping because U.S. data is so timely and transparent," Matt Smith, Energy data provider Clipper Data’s head of commodities research, said.

Less supply could lead to a drop in U.S. stockpile inventories, hence pushing oil prices up. The OPEC, led by Saudi Arabia, is planning to cut 1-1.4 million barrels per day of global supply to stabilize the declining-demand, oversupplied-market scenario.

Alexander Novak, Russia’s energy minister, said on Nov 19 that the country was planning to sign a partnership agreement with OPEC, details of which would likely be discussed at an OPEC summit in Vienna on Dec 6.

Given the likeliness of OPEC and Russia cutting crude oil supplies, a rise in oil prices is a possibility in the near future.

Industries That Could Benefit From Potential Rise in Oil Price

Increasing oil prices may not be favorable for many consumers and companies, but there are some industries whose business models allow them to profit from it. Saudi Arabia’s decision to cut crude oil shipments could prove beneficial for these industries, which could offer good investment opportunities to investors.

Rising oil prices often have a positive effect on alternative energy and oil substitute companies, as consumers turn to biofuels, coal and natural gas to compensate for energy. Coal companies such as Peabody Energy Corporation (NYSE:BTU) and Cloud Peak Energy Inc (NYSE:CLD) frequently benefit from higher oil prices.

Green technology companies such as solar module manufacturer First Solar, Inc. (NYSE:F) could gain too. Other green technology businesses that might benefit include hydrogen production units, solar and wind energy farms.

Hybrid vehicle manufacturers also profit from rising oil prices. Auto companies such as General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) also manufacture hybrid vehicles along with oil-dependent ones to compensate for losses from higher costs of oil. Auto giants such as Tesla, Inc. (NASDAQ:TSLA) predominantly manufacture electric cars and hybrid vehicles and thus need not worry about an increase in oil prices.

Other industries that could benefit at present from high oil prices by virtue of the nature of their operations are industrial gas and waste management businesses.

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