Low Oil Prices are a Buy Signal

All week, pundits, analysts, and investors have been hammering home that low oil prices are here, and the fearmongering couldn’t be thicker.

Take a look at these bearish headlines…

• From Bloomberg: “Shale Boom Tested as Sub-$90 Oil Threatens U.S. Drillers ”
• Also from Bloomberg: “Oil Bulls Keep Faith Saudi Supply Cuts Will Revive Price”
• From Reuters: “Price Fall Hastens Decline of ‘Big Oil’ as Western Majors Retreat”

Clearly, the mainstream financial press sees fear, and it is making low oil prices look like the end of the world.

With WTI under $87 per barrel, they might just be right…

So should you worry about your investments?

Let’s face it: If oil does drop below $80, drillers will have less incentive to ramp up production. But the simple truth here is that oil is a necessary and finite resource, and anytime production is curtailed or disrupted, prices go up.

So we aren’t in panic mode about the energy space right now. If anything, we’re excited for the opportunity.

And here’s why…

The Story Behind the Fear

Although Saudi Arabia recently dropped prices for Asian consumers to the lowest since the recession, oil has stayed above the profitable price for shale drillers in the U.S.

And although we are seeing a slight drop in demand here, you have to remember that we are still adjusting to our newfound oil. When you reboot your production to 1980s levels in a few years, there are bound to be hiccups.

Demand is low, and our supply is high; by the end of 2015, the U.S. will have added about 2 million barrels in daily production.

So when the market is flooded with oil — as it is now — expect to see two things happen…

One will be that low gasoline prices at the pump result in more automobile use from American motorists. Right now, gas prices in Missouri, Tennessee, Oklahoma, and several other states are at about $3 per gallon.

When more people use their cars and buy gas, the price goes up… It’s that simple. The cycle is just on a downtrend right now.

The second is that federal officials throughout the executive and legislative branches will start thinking more seriously about oil exports.

This will be good for the U.S. oil industry…

I mentioned on Tuesday that the United States shipped its first oil exports in more than a decade overseas a couple of weeks ago — approximately 800,000 barrels to Seoul.

And as our stateside producers continue increasing production, you can bet that lifting the ban on oil exports will become a hot topic in 2015. After all, we’re already shipping thousands of barrels of light-oil condensate out of Texas anyway.

And now with Alaska exporting crude oil to South Korea rather than U.S. refineries along the West Cost, it’s only a matter of time before producers in the Lower 48 turn their gaze towards Asia.

Midland’s Job Boom

Although the fear is palpable in the market right now, individual investors can look to the source of our oil fortunes for hope. 

And there’s no better place than Midland, Texas — the epicenter of the Permian Basin. It has me more bullish than ever on independent oil drillers — especially now that crude prices are so low.

Since July 2009, the median housing price in Midland has risen by 48%, and developers are leasing apartments faster than they can be built.

The school district is even offering $10,000 signing bonuses to new teachers in the area because demand for more instructors is so high.

And it’s all because the Permian has been red hot despite the lower per-barrel price of oil…

With nearly 1.8 million barrels a day in oil production, Permian producers have been hiring nonstop, creating a windfall for the local economy.

Until these local and regional signals start to point downward, I’ll remain bullish.

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.

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.