Welcome to Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publications.
Lately, it feels as if the United States has become too comfortable, particularly in regards to the energy picture.
“Why is that?” you ask.
I’ll let you decide this one.
Splashed across headlines this week has been overly-optimistic news — enough for people to sit back and relax.
The EIA’s weekly report showed that total crude and fuel products rose to 1.13 billion barrels last week — the highest level in two decades. As expected, a barrage of bearish price predictions rushed to center stage.
U.S. domestic production — which peaked at 9.6 million barrels per day in 1970 — saw its first year-over-year increase in 2009. Last year, U.S. field production averaged 5.36 million barrels per day.
Although the weekly inventory report showed an 818,000 barrel decline, we’re still comfortably above the five-year average, as you can see below:
At least the government is comfortable enough to impose a moratorium on deep-water drilling operations — never mind the fact that the four major oil companies are creating a rapid-response system, spending a billion dollars in the process, all in the wake of the BP fiasco…
Let’s also forget that our demand is rising on top of things.
Meanwhile, other countries are scrambling hand-over-fist to secure their energy future.
For the first time ever, Mexico will allow foreign oil companies (think Exxon, Shell, Chevron, and that ilk) to explore and produce oil from their shallow water and mature oil fields.
We’ll call it Mexico’s last-ditch effort to stop the country’s production from falling further. (I’ve touched on Mexico’s peak oil troubles before.)
Allowing foreign oil companies into Mexico’s lesser-attractive fields is just a precursor for things to come. In the future, don’t be surprised to see those contracts extend into deepwater targets… And unlike the U.S., the deepwater oil in the Gulf of Mexico is one of Mexico’s last chances to put off becoming an oil net-importer.
They’re looking ahead — and we’re falling behind
China’s energy buying spree has been taken to new heights.
Believe me, dear reader, if the we’re going to complain about where we get our oil, we’ll soon find ourselves back in the arms of the Middle East — a thought I don’t find comforting.
And if we make too much of a fuss over Canadian oil and gas imports, China is more than willing to take our spot.
In June, China imported a record 5.4 million barrels of oil daily. That’s more than half of the country’s consumption.
And if we look at 2010 overall, it gets even more staggering: so far this year, China averaged 4.77 million barrels per day in oil imports (over 30% more than 2009). As you can guess, the country’s oil demand is also experiencing double-digit growth, up nearly 19% over last year.
And if you think China isn’t eying up our Canadian neighbor as a source of oil, think again. Recall that back in April, China dished out $4.65 billion for ConocoPhillips’ 0.03% stake in the Syncrude project. The Syncrude project pumps out approximately 350,000 barrels per day — roughly 13% of Canada’s total output.
Two months later, China National Petroleum Corp. announced a joint venture with Encana to develop unconventional gas resources in the Horn River and Montney prospects. And that’s not the first time the B.C. unconventional gas play has caught our attention… In February, Korea Gas Corp. pledged over $1 billion during the next five years for an interest in two fields.
The energy scramble isn’t specifically tied to North America, either. Take a look at how one such oil discovery is making investors a small fortune.
Again I pose the question: Are we getting too comfortable with our energy picture?
Enjoy your weekend,
Keith Kohl
Energy and Capital
P.S. You can catch up on the week’s top articles from Energy and Capital and our sister publication, Wealth Daily, below.
Profiting Under their Radar: Investors are Tapping into This Massive New Oil Discovery in the Last Place You’d Expect
After being left in the dark for more than 70 years, this massive oil field is just beginning to be developed. In fact one tiny, virtually unknown company has already struck oil, to the delight and profit of Energy and Capital readers.
America’s Inevitable Oil Rush: Looking Beyond the BP Oil Disaster to Onshore Profits
Think everything is fine now that the BP well is sealed? Unfortunately, the nightmare has just begun for offshore companies. Even more important is how it is shaping the future of U.S. oil production, leading us to the next great oil boom.
U.S. Oil’s Big Potential: A Different Way to Play the U.S. Oil Comeback
Editor Keith Kohl takes a look down the road, offering readers a strong investment strategy and warning about another.
Nuclear Start-up Companies: Several Billionaires are Investing in Nuclear
Editor Nick Hodge discloses how billionaires get richer: they invest in young nuclear companies.
Energy Efficient Lighting Contracts: Why this $2 Company Could Land a $416 Million Military Contract
Editor Jeff Siegel reveals a $2 micro-cap in line to land some major deals with the U.S. military.
Natural Gas Prices: What No One Else Has Caught… Yet
Editor Ian Cooper revisits his spot-on $4 bottom call for natural gas, and explains what the bears are about to miss out on… again.
Alzheimer’s Drugs: The Good, the Bad, and the Prospects
Publisher Brian Hicks brings readers the latest developments in the fight against Alzheimer’s… and a game-changing stock that’s up 50% for the year.
Will BP’s Relief Wells Go Live? Reopening the Well from Hell
Analyst Adam Sharp discusses whether or not BP will turn their relief wells into production wells.
