Editor’s Update on the Bakken Formation:
By now you know the Bakken is a big deal in our nation’s oil picture. The giant oil formation holds as much as 4.3 billion barrels of technically recoverable oil… with many companies already drilling there with success. And now comes word we may be looking at a second giant oil formation… a "second Bakken," as it’s being called.
It’s called the Three Forks – Sanish formation, and lies directly beneath the Bakken. The news, of which, has already sent our Bakken stock plays skyrocketing. Fortunately it’s not too late for investors to get a piece of the action. The details are all in our new report, which you can find right here.
Keith Kohl
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Up or down. More or less. Buy or sell.
Chances are good that you have thought about one of these things lately. I don’t blame you. Not a day goes by that they don’t cross my mind.
Then again, it all depends on to whom you’re listening.
The majority of oil forecasts that I’ve read lately are tagging year-end oil prices around $40 per barrel. While they differ in how deep the recession will go, nearly all predict prices will stay flat throughout the year. Several even went so far as saying prices will drop fall below $30 per barrel during the second half of 2009.
I can understand how those bearish forecasts are difficult to ignore. After running nearly to $50/bbl a few weeks ago, we are once again looking at oil prices below $35. Last week’s U.S. crude oil stocks were 39.5 million barrels above last year’s level. In fact, our crude stockpile has been rising since last July, now well above 5-year levels.
Let me ask you, dear reader, "Do you honestly see oil at $20 per barrel in December ’09?" Please feel free to leave me your predictions in the comments section below.
Forecast Fears
There’s a reason I don’t think much of those forecasts. The fact is that many of those people got burnt from their predictions. This time around, I expect all of them will hesitate before making a bullish call on oil.
Earlier today, I couldn’t help but laugh after reading one in particular that said oil would stay below $50 for the next five years.
Five years?!?
Even with lower consumption levels, my outlook over the next several years doesn’t change. As the world climbs out of this recession, demand will inevitably pick up again. Ever since oil prices collapsed from July records, not a week goes by without another project being delayed. Eventually we’re going to see supply balance out.
Then again, there’s always the OPEC factor.
Backing OPEC into a Corner
I’ll admit that OPEC cuts in the past were nearly always taken with a grain of salt. Cheating on quotas was the norm. Why would they want to cut output? Prices moved from $20 per barrel to $147 per barrel within a few years. It wouldn’t make much sense to cut when record revenues were pouring in.
Of course, it was a different climate for prices back then. Oil prices would jump on the mere hint that OPEC would make a cut.
Today is a much different story.
As you know, OPEC recently announced a second cut in output. The effect on oil prices was a bit different this time. The day after the announcement, prices fell under $33 per barrel. Naturally, the question was whether or not OPEC would follow through with their plan to shave output by 4.2 million barrels per day. Perhaps the market was calling OPEC’s bluff.
Has OPEC been backed so far into a corner that they’re running out of options? In order to defend prices, the cartel has no choice but to follow through on their plan. A few days ago, Iran warned their Asian and European clients that they can expect less oil in the near future. Since September, Iran has cut more than half a million barrels per day from its supply.
Yet again, the news failed to move the dial on prices. Don’t be surprised when OPEC comes out with another round of production cuts.
Is Oil’s Rebound in Sight?
With the demand slump easing, there is even more opportunity out there for us.
I’ve said this before, despite all the naysayers, and I’ll happily repeat it: Oil prices will make a comeback this year. Although we may not see triple-digit oil prices for a while, that doesn’t lessen my resolve.
In this market, the clearcut winner will be any investor savvy enough to recognize the buying opportunity in front of their eyes. How much time will pass before you see how many energy companies have been unfairly beaten down? Personally, I’d rather pick up those quality companies at a discount than wait until they’re back at 52-week highs.
Until next time,
Keith Kohl
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