There’s a chance for investors who act accordingly to make a fortune off of oil stocks within the next few months.
The way it looks now, the window for this opportunity is small, but if played correctly, investors could see serious gains from oil stocks after a long period of losses for the sector.
Let me explain…
The last week has seen oil rise to its highest price year to date…
Per-barrel prices for West Texas Intermediate crude closed at $57.66 on Thursday after a series of gains throughout this week and last.
Most analysts chalked this up to a few different things…
The two most prominent causes are the conflict in Yemen and the falling U.S. shale rig count.
Baker Hughes reported earlier this week that U.S. rig counts have been cut in half since last summer to under 1,000, and in response, the services company announced more layoffs, bringing its total to 10,500 so far.
Meanwhile, the conflict in Yemen has serious implications for the flow of crude oil out of the Middle East.
Here’s what I mean…
Saudi Enforcers
In the latest chapter of a proxy conflict between Saudi Arabia and Iran, the Saudis have been executing airstrikes against Iranian-backed Houthi rebels in Yemen.
Earlier this year, the rebels overthrew the Yemeni government, and Saudi Arabia is desperate to return control of the country to friendly leadership.
The reason for all of this is all small strip of water called the Bab el-Mandeb strait:
The strait lies on the west coast of Yemen and has become a major chokepoint for oil and gas shipment through the Red Sea and Suez Canal.
According to the Energy Information Administration, the Bab el-Mandeb has seen tremendous growth in throughput over the last four years…
Between 2013 and 2014, shipments grew 20%, and since 2010, shipments nearly doubled from 2.7 million barrels of oil equivalent per day to 4.7 million barrels.
So it’s no wonder that the stakes are so high in the Yemen conflict despite the country’s own lack of fossil fuel production.
Considering these factors, it’s also no wonder that the news of conflict in Yemen has helped oil prices rise.
If the Saudi hold on the Bab el-Mandeb strait becomes any more tenuous, it could constrain oil supplies — or as things are now, the Kingdom will be under pressure to support higher oil prices to fund the conflict if it gets out of hand.
And when you add this to the floundering rig count in the U.S., you see the market react as it has for the last two weeks: with higher oil prices.
Now, the same factors pushing oil higher are creating a window for oil and gas investors to see profits in the next few months…
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2015 Oil Price Outlook
Regular readers of mine know that the strategy for U.S. shale drillers during the bear market has been to drill wells but wait to complete them until oil prices rise to more profitable levels.
And as Bloomberg reported yesterday, companies are closing in on a profitable price point. They will soon complete some of their frack-ready wells and pump more oil into what many still consider an oversupplied market.
Halliburton says there are about 4,000 wells ready for completion in formations throughout the U.S., and if oil prices reach $65 per barrel, companies will pump oil from them.
If this scenario unfolds as Bloomberg predicts, the world would see an extra 500,000 barrels of oil per day hit the market by the end of 2016.
At this point, the extra oil would send prices down again and likely restart the entire process of prices falling and rising with the productivity of U.S. shale.
The upside of this is that if it does happen, investors can prepare with good timing…
While oil prices rise and the good news starts rolling in about drillers seeing more profit and growing production, stocks will rise as well.
If you buy the stocks that are likely to rise now, you stand to make some good money when they do.
The only downside for investors is the timing of the sell.
Because if oil is sure to go back down, then investors will want to sell before prices crash again, which could be difficult to time.
Of course, you can’t sell anything when you haven’t bought a single share, so there’s no need to worry about that just yet.
Instead, I suggest that if you would like to make money as oil prices rise, you should invest in the stocks that are undervalued today and be ready to sell when the market gets bullish again.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
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