“This is a big deal.”
These were the words my colleague Chris DeHaemer wrote to you yesterday as he described some of the benefits of the agreement between Iraq and the Kurdistan Regional Government (KRG) over disputed oil.
As he mentioned, it’s a process that’s taken no less than 10 years and a fair amount of back-and-forth aggression.
Now that the two sides are working together, however, ISIS is flanked by a massive foe.
In the map above, you’ll see Kurdish territory to the northeast (including oil-rich Kirkuk), the Iraqi federal government’s territory south of Baghdad, and ISIS-held territory in between the two allied sides.
Which brings up a question: Could we finally see peace in Iraq?
Truth is, it’s hard to tell right now. But the prospects look better than they have in a long time.
However, what I can confidently say is that this deal not only brokered peace between two age-old enemies, but it also opened up opportunities for those of us out of the line of fire.
10 Years? More Like a Century
While Chris (and many others) are right to say this deal had been on the table for 10 years without resolution, disputes between Kurdistan and the rest of Iraq go back much farther than that.
Ever since the formation of Iraq in the early 1900s, Kurds in the northeast have been the victims of invasions, persecution, and mass murder by other groups in the south.
When Saddam Hussein rose to power, he spent the better part of a decade ordering his soldiers to kill 180,000 Kurdish civilians.
It wasn’t until the American invasion that oil in the northern Kurdish territories became an issue between the two sides — mostly because Saddam missed out on it (more on this in a moment).
And now that the two forces have finally come to reasonable terms, it looks as though they are each ready to put a history of violence and anger behind them to fight their common foe.
With this in mind, many analysts still cried out in anguish yesterday that the addition of an extra 550,000 barrels per day on the oil market would cause oil prices to dip even further.
Just check out this headline from Bloomberg: “There Are 300,000 Iraqi Barrels Signaling Oil Glut Will Deepen.”
But if you pay attention, you’ll realize these analysts are missing out on one huge piece of the puzzle…
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Investors Are Looking in the Wrong Place
If you have any money in oil investments, you already know the bear market has only gotten worse since the OPEC meeting on Thanksgiving.
After the initial rally following news of the Iraq/Kurdistan deal, oil fell further because of calls like the one I just showed you by analysts bemoaning more supply on the market.
As the chart above shows in painful detail, the glut is rising faster than our consumption…
Which means these analysts are correct to say more oil will hurt oil investing. But what they either ignore or fail to realize is that it will still benefit a select few investments.
See, although low oil prices — now exacerbated by the agreement in Iraq — will hurt companies in the oil sands in Venezuela, Russian exporters, and even some U.S. shale companies deep in debt, there are a few big winners.
Namely those who don’t spend anywhere near as much to pump a barrel of oil out of the ground…
In this case, I’m talking about Kurdish producers.
The reason Chris and I have been so bullish despite low oil prices recently is that he’s had his eye on a Kurdish company that will still make a lot of money in the bear market.
Not only that, but the deal in Iraq now gives this company an even better outlook since it won’t be battling the Iraqi government anymore.
On news of the deal, its stock shot up 10%.
Don’t let that fool you, though — it still has plenty of room to run, and run it will.
But every day you wait is money you’ve lost on this powerful play.
You can find the ticker symbol here.
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.
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