We’re long-term energy bulls.
That’s simply because nothing happens without energy.
It doesn’t matter if we’re talking oil, electricity, hydrogen, or corn… The world has and always will need some way to generate, distribute, and use energy.
In particular is the need for energy to transport both people and goods. Today, that’s your basic planes, trains, automobiles, ships, and Segways.
Fred Flintstone was able to use his feet to power his vehicle. And maybe it’s because our feet are not as strong today, but we mostly need gasoline and diesel to power our cars and other vehicles.
The future of transportation promises zero emissions, higher efficiency, and lower costs with electric and fuel cell vehicles. But the present transportation infrastructure needs crude oil for gasoline and diesel now.
And that’s not going to change in the immediate future.
The IEA still expects demand for crude oil to continue increasing through at least the year 2030.
Others have similar outlooks: Oil is dying. But it’s not dead.
And right now you should be bullish in the short term on crude oil with supply fears coming back into focus.
The price of oil increased 3% last week after the EIA reported a larger-than-expected draw down of U.S. crude inventories.
Data showed American crude stocks falling 5.8 million barrels — much higher than the 1.5 million barrels forecast by analysts.
WTI crude oil for October delivery is currently trading just under $69 per barrel.
It’s likely that U.S. inventories will continue to be the main driver of oil prices for the next week or so. The value of the U.S. dollar will most likely be a secondary factor in crude prices.
But in the next few weeks, fears of tightening global supplies should be expected to increase, as sanctions from the U.S. against countries buying oil from Iran draw near.
On August 6th, Trump signed a new executive order that made changes to sanctions policies in the May order to exit the Iran deal.
The new order called for sanctions against governments, companies, and private individuals doing business with Iran in two phases.
The first phase of these sanctions began the very next day of the new order’s signing, August 7th. It mostly targets monetary assets, including certain currency transactions, gold and other metals, and dealings in Iranian sovereign debt. The initial sanction phase also took aim at Iran’s auto industry.
The second phase is considered more detrimental. And it will be the bigger of the two phases in terms of media coverage.
It targets Iran’s financial and energy sectors. That includes the country’s central bank and oil exports. It also singles out Iran’s port operators, shipping, and shipbuilding sectors in an additional effort to target the nation’s energy industry.
This phase will begin November 5th, just nine weeks from today.
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Whether or not U.S. sanctions will affect Iranian output and global supply is left to be seen. Some European nations have already begun to decrease crude imports from Iran and will seemingly comply.
Others, however, like China, don’t appear ready to bow to pressure from Washington.
What we can expect, though, is that the sanctions story will produce more headlines as the November date draws closer.
Those headlines will likely prompt speculators to jump into energy, leading to higher investor demand and ultimately higher prices. That’s why you should be bullish on oil right now.
The price of WTI has already tested $80 this year. With all that’s going on surrounding U.S. sanctions against Iranian oil importers, we could see prices again closer to the $100 level.
Of course, we will remain bullish on energy over the long term. But short-term opportunities like this should be properly leveraged. Investors should be buying oil stocks ahead of the ballyhoo the media will make of the nearing U.S. sanctions.
President Trump has just tossed us a meatball.
Swing at it.
Until next time,
Luke Burgess
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
