Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How to Profit from Crude Oil's Next Surge

Commodities / Crude Oil Jul 18, 2007 - 10:23 AM GMT

By: Money_and_Markets

Commodities

Sean Brodrick writes: I have bad news: If you think oil prices are high now, you ain't seen nothin' yet. The good news is that you can profit from oil's next move. That should help you pay your soaring bills when gasoline accelerates past $4 a gallon. More on that in a moment. First, let's talk about why energy prices are on the move.

About a month ago, I gave you "Three Triggers for Higher Oil Prices." Just to refresh your memory, they are: 1. the potential for monster hurricanes in the Gulf of Mexico, 2. spreading violence in the Persian Gulf, and 3. a potential al Qaeda attack on U.S. oil facilities.


Since then, oil prices catapulted from $66.26 to as high as $75 a barrel yesterday. And guess what? None of those three things I warned you about have even happened yet!

Mind you, I think these scenarios are only getting more likely. For example, we haven't seen any hurricanes in July, but we usually don't. Historically speaking, August, September and October are the busiest months for tropical storms.

You're probably wondering why oil prices have been rising even without these catalysts. The reason is simple: The supply/demand picture for oil is tight and getting tighter.

In fact, I'm here to tell you that even if NONE of those big three things happen, we could still see $90-per-barrel oil this year! And if one or more of those dire events I warned of actually happens, prices could spike even higher.

Let me explain …

Oil Prices Are Riding the Wave of Global Expansion

Why is oil going higher? Simple — the global economy is growing, business from Brazil to Singapore is booming, the world's population is trading in bicycles for cars, and global oil demand can't keep up.

Some critical facts …

  • The global economy is growing at about 4.5% per year.
  • As a result, The International Energy Agency (IEA) projects in its Medium Term Oil Market Report that global oil demand will grow 2.2% a year, on average. By 2012, it should reach 95.8 million barrels per day (bpd) vs. 86 million bpd this year.
  • At the same time, spare capacity — almost all of which is in Saudi Arabia — is going to approach the vanishing point.
  • Even worse, the IEA expects supply increases from non-OPEC oil producers and biofuel producers to start dwindling even earlier — around 2009.

All that boils down to an ugly picture from the IEA …

As you can see, even with moderate GDP growth, the world's oil demand growth is going to start outpacing supply growth by 2010!

And even if the global economy slows down, global oil demand growth will start outpacing supply in 2011!

In other words, the "Big Squeeze" will start within four years … regardless of what economic scenario you believe in.

Plus, the IEA has more gloomy news for us:

  • We're getting between 3% and 4% LESS out of existing oilfields every year.
  • Mature producing areas and many recent deepwater projects are declining at even sharper rates — 15% to 20% annually!
  • All told, the oil industry needs to add three million bpd of new supply each year just to offset declines in existing fields.

Yet the oil majors are having trouble finding oil. For example, last year was the first time — EVER — that Exxon didn't replace its reserves through its own drilling, according to Oppenheimer research.

The situation is complicated by another fact: More and more of the world's oil reserves are under the thumbs of national oil companies, such as Saudi Arabia's Aramco, Mexico's Pemex, and Venezuela's PDVSA. These companies aren't as efficient as Western majors at finding oil, and the countries that have the remaining large oil deposits often scare off or even forbid outside investment.

Sounds bad, right? It is. However …

The IEA Is Probably Being Too Optimistic About Global Oil Supplies!

If anything, the Big Squeeze might come sooner than the International Energy Agency's 2010-2011 forecast. Here's why …

The IEA is expecting OPEC to ramp up production by about 600,000 bpd next year to 32 million bpd.

But OPEC's latest report reveals that the cartel's production is actually FALLING — down to 30.06 million barrels a day in June. That's a drop of 96,600 bpd from May.

What's more, according to the IEA's own chief economist, Fatih Birol,

"If Iraqi production does not rise exponentially by 2015, we have a very big problem, even if Saudi Arabia fulfills all its promises. The numbers are very simple, there's no need to be an expert."

Well, the latest OPEC report shows that Iraq's production is falling the fastest of any of the cartel members — a drop of 78,000 barrels per day in June.

You know what the situation in Iraq is like. Civil war … chaos … madness! Do you think Iraq will experience "exponential" growth in its oil production anytime soon? No way!

And Iraq isn't the only OPEC member with declining production. In June, Kuwait and Venezuela saw declines of 38,300 and 34,000 bpd, respectively. Saudi Arabian production also fell — by 33,300 bpd. The Saudis say they can turn the spigots back on. Let's hope that's true.

Meanwhile, oil production is declining in some non-OPEC countries, too. I'm talking about places like the U.K., Norway, and Mexico.

Goldman Sachs Group Inc. said in a report on Monday that Saudi Arabia, the United Arab Emirates, and Kuwait must increase production by the end of this summer. According to the Wall Street firm, this production increase is "critical" to avoid prices surging above $90 a barrel in the fourth quarter of this year.

Here's How You Can Prepare For Even Higher Oil and Gas Prices

First, you can buy a fuel-efficient car. To see the EPA's list of the most fuel efficient cars, click here .

Second, talk to your boss about telecommuting two or three days per week. You'll save time and money. And you'll help America kick its addiction to foreign oil in the process. While it's unlikely that we can totally eliminate our dependence on Middle Eastern oil, the less we use of it, the less of a stranglehold the Saudis have over us.

Third, invest in underloved oil and gas stocks that are going to ride the wave of higher prices. I just recommended two issues to my Red-Hot Resources subscribers on Monday — stocks that trade at eight and nine times earnings. For some reason, Wall Street just can't see these gems waiting to be scooped up — even with oil prices poised to go sky-high!

Of course, if you don't like the potential volatility of individual stocks, you can also consider a good ETF like the Energy Select SPDR (XLE) .

One caution: 33% of the XLE is in two stocks, ExxonMobil and Chevron. For that reason, you might also want to check out a mutual fund like U.S. Global Investors Global Resources Fund (PSPFX) . This no-load fund's holdings are more spread out through the energy complex, with top holdings Schlumberger, Noble Corp., and White Nile each taking up less than 3% of the total portfolio.

I mentioned both of these funds back in that June column on energy. Since then, they've done pretty well: The XLE is up over 4% since then, and PSPFX is up about 9%!

Remember, if you're buying stocks or funds on your own, do your homework first. Only you can decide what's right for your own portfolio. But whatever you do, get ready for a wild ride in energy prices this summer!

Yours for trading profits,

By Sean Brodrick

P.S. It's not too late to get in on my latest energy picks in Red-Hot Resources , either. Just call 1-800-430-3683 and tell 'em Sean sent ya. We'll jump-start your portfolio with my latest oil picks, along with two core uranium positions that look poised for blast-off. You can also subscribe by clicking here .

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Bill
20 Jul 07, 20:25
$90 crude oil

The solution to the energy price situation is--elimination of the cause of the volatility--the futures market. Outlaw it, ban it, suspend it, destroy it. If need be, eliminate the individuals who practice it! At one time the futures markets had a calming effect on prices of commodities, no longer! The hedonistic thirst for quick and easy money have morphed a positive into a negative. Call your elected officials and demand that they stop these profiteering speculators!


Post Comment

Only logged in users are allowed to post comments. Register/ Log in