If You’re Trading $90 Oil, Here’s What You Need to Watch Out For

Life was much easier for investors in the oil patch 11 years ago.

My veteran readers remember those boom times well, when names like Kodiak Oil & Gas, Brigham Exploration, and Northern Oil and Gas delivered us the easiest jaw-dropping returns that built fortunes and minted millionaires. 

Back then, it was like shooting fish in a barrel while the market was whipped into a frenzy during the early years of the U.S. tight oil boom. 

I remember joking with a few close friends in our growing investment community that you could blindly throw a dart against a wall of oil stocks and double your money. 

It was a time when “Drill, baby, drill” wasn’t just a political slogan to garner a few votes — a mantra investors could take to heart as our domestic production soared to new heights. 

It was true! 

Within a few short years, the U.S. oil industry reversed a decades-long decline in output that many believed was irreversible. 

For myself, I can still smell the hydrogen sulfide in the air as my beat-up Chevy rolled down Highway 20 through Odessa, Texas. 

Yet it wasn’t the pungent fumes hitting my nostrils like a cup of Folgers coffee that morning that captivated my attention…

It was the sea of drilling rigs that dotted the landscape. 

At the time, there were nearly 500 of them spread across the Lone Star State, and it was clear that boom times were back in West Texas. Operators in Texas’ fields had tripled the state’s crude oil production between 2009 and 2014. 

For many of the older roughnecks on those rigs, it was a rebirth of Texas oil. 

Even more impressive is that despite two short periods of lower output — an oil price crash in 2015 and another price crash during the COVID pandemic — Texas’ oil production continued to climb higher. 

In fact, we’ve seen the state’s production reach new record highs in recent months. Take a look for yourself:

This isn’t from simple luck or happenstance. 

You know just as well as I do that there’s only one way for oil production to recover — you have to drill your way out. 

But there’s a slight hitch here…

Despite WTI crude trading just shy of $90 per barrel yesterday, the number of rigs actively drilling for crude has been steadily declining all year. In Texas, there are now only 308 rigs out in the state’s oil fields, which is 46 fewer rigs than were running at the end of April 2023. 

For a little perspective, that represents 60% of the total U.S. rig count right now.

Mind you, this isn’t just a Texas concern; the U.S. rig count has dropped by nearly 17% over the past 12 months. 

What’s interesting is that despite the drilling downturn, practically everyone I talk to expects to see the U.S. not only reach our pre-COVID peak output of 13 million barrels per day but surpass it. 

However, hitting that new record isn’t what you should be paying attention to right now — it’s what comes after!

Even the IEA, which recently called for “no new long-lead upstream oil and gas projects,” knows how crucial tight oil production in the U.S. is for market stability. 

You can bet that leaves the door wide open for a small group of drillers in the Texas oil patch.

Until next time,

Keith Kohl

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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.

Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.