Source: upstream midstream downstream (oil industry) – AAVOS International
The oil and gas industry can be a complex jargon that new investors may find difficult to comprehend. Today, I’ll break it down for you in a straightforward manner so that you can understand it better.
The oil and gas industry is broken down into three segments which comprised of upstream, midstream, and downstream
Companies involved in the exploration and production of oil and gas are known as upstream businesses. They are the company who build drilling machine in onshore or offshore to drill the oil and gases. The upstream company normally are at higher risk as they need high investment in capital to locate and drill oil and gases. Besides they are technologically intensive as well.
However, they are usually the first to benefit directly from an increase in crude oil prices.
Example of companies: HIBISCUS, VELESTO, SPRING
Businesses that are focused on transportation are classified as midstream. They are in charge of transporting the extracted raw materials to refineries where the oil and gas are processed. Shipping, trucking, pipelines, and raw material storage are all characteristics of midstream companies.
Besides, those company that provides engineering services and solution for oil and gas sector also can be classified as midstream as well. The success of upstream companies normally has a direct effect on the midstream
Example of companies: DIALOG, ARMADA, SERBADK
Refineries are downstream businesses. These are the businesses in charge of removing impurities and converting crude oil and gas into consumer goods. They sell and distribute products to consumers such as gasoline, kerosene, jet fuel, diesel oil, and so on.
Example of companies: PETDAG. PETGAS, HENGYUAN
Update on recent stock prices of gases
Crude oil has surpassed $80 per barrel for the first time since November, as demand for oil picks up due to the economy’s reopening, while supply remains tight.
The reason for the shortage is because of the OPEC Group’s supply restrictions. OPEC, or the Organization of the Petroleum Exporting Countries, has a significant impact on oil prices because it manages oil production in its member countries by setting crude oil production targets, or quotas. OPEC is made up of countries with some of the world’s largest oil reserves. At the end of 2018, OPEC members controlled approximately 72% of the total world’s proved oil reserves, and they produced 41% of total world crude oil production.
Oil-producing economies have reduced their oil outputs as a result of the pandemic. However, as the economy recovers and demand for oil rises, OPEC continues to impose production restrictions on its members and maintains a gradual increase in output. This eventually resulted in an increase in oil and gas prices that we see today.
As a result, for investors or traders, there are a few factors we can keep an eye on to determine oil price trends in the future. These include OPEC’s decision at the upcoming forward OPEC meeting on November 4, as well as whether the Covid new delta variant will affect the gradual slowdown in the economy’s reopening.