Upside to COP Stock as Demand from Emerging Countries Raises Oil and NGL Prices

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Market
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Trefis
COP: ConocoPhillips logo
COP
ConocoPhillips

The average price realized by ConocoPhillips (NYSE:COP) for crude oil and natural gas liquids (NGL) has been volatile in the past. This is because oil prices in global markets are generally influenced by supply, which is largely dependent on the production quota set by OPEC, oil reserves, oil demand and global political uncertainties.

ConocoPhillips competes with Massey (NYSE:MEE), ExxonMobil (NYSE:XOM) and Anadarko (NYSE:APC) in the oil market. We expect a gradual increase in the average oil and NGL prices to around $83 by the end of our forecast period. In comparison, the Trefis community predicts a higher price level of $106, translating into an upside of 6% to our price estimate for COP stock.

We currently have a Trefis price estimate of $68.44 for ConocoPhillips’s stock, in line with the current market price.

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Uncertainty Post-Economic Crisis

The global economy saw one of the worst recessions in recent history as oil prices correspondingly fell 70% form their peak. This uncertainty has led many oil exporting countries to rethink their decision to invest in new capacity.

Growing Demand from Emerging Countries

The growth in economic activity in emerging countries and the resulting demand for oil has helped keep oil prices elevated. In 2000, China consumed 4,772 barrels of crude oil a day, and this figure increased to 8,625 in 2009 (up nearly 81%). This compares to the 5% decline in the number of barrels consumed in the US over the same period. At this growth rate, China can expect to see their demand increase more than the US in the near future.

Trefis Community Forecast

The Trefis community forecasts that the price of crude oil & natural gas liquids will increase from an estimated $63 in 2010 to just over $106 per barrel by the end of our forecast period, compared to the baseline Trefis estimate of an increase to $83 during the same period. The community forecasts imply an upside of 6% to the Trefis price estimate for ConocoPhillips’s stock.

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Our complete analysis for ConocoPhillips’ stock is here.

See our full company breakdown and estimates for key drivers to ConocoPhillips’ stock value in the display below.