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Can U.S. Oil Independence Become Bullish for Shippers?

NEW YORK ( TheStreet) -- This year, for the first time since 1995, the U.S. is anticipated to domestically produce more oil than is imported. As a result of domestic oil production increases, net imports of crude oil are on track to decline to the lowest level in nearly 20 years.

Lower demand for imported oil is exciting news for consumers and for domestic security. I look forward to the day when net imports drop to zero. I believe the time is coming and may arrive sooner than many predict. For the last five years in a row, the U.S. has imported less natural gas than the previous year.

Natural gas producers have recently reversed course and halted operating rigs and/or stopped rigs from coming online as a result of the energy boom shale fracking created.

The slower trajectory by U.S. natural gas producers appear to have paid off. Natural gas prices, as measured by The US Natural Gas Fund (UNG), have bounced off a bottom and are unlikely to test the lows soon. Oil may be in a different boat, though.

A price of oil is far from historic lows, and lower U.S. demand for oil is offset by Asian demand. The United States Oil Fund ETF (USO) is trading near $34, but if it declined at the same rate of UNG in the past four years it would trade closer to $7.

Unlike natural gas, the relatively higher price of oil provides the needed incentive for domestic producers to continue increasing production. If oil prices fall far enough that may change, but for now U.S. domestic production continues to grow.

Intuitively, investors may at first assume that lower U.S. imports would diminish demand for oil tankers and shipping companies. Shipping companies Frontline (FRO - Get Report), Overseas Shipholding Group (OSGIQ), and Teekay Corporation (TK - Get Report) have bounced off 2012 lows recently.
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UNG $9.00 -0.55%
USO $13.25 -0.53%
OSGIQ $6.85 20.18%
FRO $3.08 0.16%
TK $28.15 0.86%


Chart of I:DJI
DOW 17,845.49 +33.30 0.19%
S&P 500 2,090.64 +1.50 0.07%
NASDAQ 5,118.5510 +15.7430 0.31%

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