We’re coming to that magical time of the year when the 12 members of OPEC get together to cry about production growth in North America.
And once again, OPEC will be faced with a crucial decision: to cut or not to cut output.
If you don’t bat an eye at these little get-togethers, just remember what happened last time…
Crude oil prices plummeted the moment OPEC announced it wasn’t cutting production. Over the following four months, the cost for a barrel of West Texas Intermediate crashed by roughly 43%.
Anyone with a dime in oil stocks felt the sting… myself included.
It also created an incredible buying opportunity.
Oil Outlook: Easing the Glut
Fortunately, it’s easier to predict the outcome of next week’s OPEC meeting.
Iran’s Oil Minister Bijan Zanganeh summed it up nicely recently, saying, “Lowering OPEC’s production ceiling requires consensus between all members… under current conditions it seems unlikely that OPEC production ceiling will change.”
Of course, if Iran had its way, the oil cartel would cut production by 1.5 million barrels per day to bolster oil prices.
There’s a slight hitch to that plan, however — they would have to convince the Saudis to go along with it.
That, dear reader, won’t happen.
Right now, the Saudis are protecting their market share at all costs, and King Salman doesn’t care who he takes down in the process — including his fellow OPEC brethren.
Up until now, their strategy has worked, especially given the strain on tight oil producers in the Lower 48.
But is it time to party like it’s 2009?
Six years ago, it was almost too easy for us to answer the question of whether or not it’s time to buy.
It was a resounding yes!
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In February of 2009, I mentioned that investors should recognize the buying opportunity before them. I even suggested three stocks that were beaten to a pulp. I’m sure you’ve heard of one of them: EOG Resources.
Here’s the kind of run that would make Warren Buffett salivate…
Back then, you could blindly throw a dart at a wall of random companies and come up with a winner. And it’s more than likely that winner could have doubled, even tripled your investment.
There is, however, a major difference between 2009 and today…
As you might’ve guessed, the issue now is how soon the U.S. will be able to work through its supply glut.
Oil inventories haven’t been this high since the 1930s!
Click Chart to Enlarge
Thing is, the best cure for low oil prices is low oil prices.
Few times since 2008 have I been able to say that production in North Dakota has declined, but that’s precisely what the Energy Information Administration suggested in its latest Drilling Productivity Report.
In fact, shale oil production in the United States actually declined by around 1% this month and is expected to drop further in June.
Moreover, the falling rig count — which has decreased by nearly 60% since December — is starting to weigh on output and effectively strengthen oil prices going forward.
In other words, we’re setting ourselves up for a rebound in oil prices during the second half of 2015.
Now, the question is whether you’re going to miss out on this rally.
I hope not.
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.
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