The soothsayers have been out in full force lately, yet none can agree on where oil is headed.
In some cases, the disparities are staggering.
Just weeks after oil began rallying from a fresh 52-week low of $43.58 per barrel on January 29th, it seems like both sides of the fence are adamant that theirs is the correct forecast.
But whom do we trust?
OPEC’s Secretary-General Abdulla al-Badri decided to go all-in right out of the gate, saying that we’ll see oil hit $200 per barrel.
What was the method to his madness? It’s a mixed case of budget cutbacks, exploration grinding to a halt, and the high cost of production associated with today’s oil fields.
Not to be outdone, however, Citigroup one-upped the Secretary-General when it reported that oil prices would collapse to $20 per barrel. The catalysts for this decline, it reported, include record output from some of the world’s top producers like Saudi Arabia, Iraq, Russia, and Brazil.
So, $20 or $200?
Here’s a hint: Don’t waste your time with hyperbolic oil predictions designed to steal the media spotlight.
Instead, focus on the immediate buying opportunity taking shape before your eyes…
Party Like it’s 2020
One thing we do know for certain is that U.S. oil production cannot possibly continue growing at the same pace.
With crude prices now hovering slightly north of $50 per barrel, expecting our tight oil output to increase by a million barrels per day is foolish.
Not that we haven’t enjoyed the fruits of an oil boom, mind you. The EIA recently reported that the U.S. contributed almost 1.6 million barrels per day to global oil supply growth last year:
Even combined, the competition doesn’t come close.
The current low-price environment, however, will be enough to significantly slow growth in the U.S.
The IEA weighed in on this subject recently, suggesting that U.S. tight oil will eventually pick up, growing to 5.2 million barrels per day by 2020.
But what’s the breaking point for booming states like North Dakota?
The good part is that we have more reliable sources than OPEC when it comes to this question.
According to North Dakota’s Department of Mineral Resources, prices need to stay above $55 per barrel for production to continue growing:
Click Table to Enlarge
That said, keep in mind that the break-even price for new drilling isn’t the same throughout the Bakken. In fact, I mentioned to my readers recently that two-thirds of North Dakota’s oil production takes place in just three counties.
Of course, the break-even prices in these counties are approximately $36/bbl, $30/bbl, and $29/bbl.
Unfortunately, there are much bigger obstacles ahead for oil companies in North Dakota.
Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
North Dakota’s Fate: Boom or Bust
Let’s be honest, unless we want to increase oil imports from places like Saudi Arabia and revert back to the days when OPEC was able to manipulate global prices at will, it’s in the United States’ best interest to keep developing its tight oil resources.
And while we’re being honest, both you and I know full well that the Bakken oil industry won’t crumble.
Perhaps the worst-kept secret in the Williston Basin is the severe lack of infrastructure. Essentially, there are three options that all Bakken producers have when it comes to transporting their crude oil: pipeline, rail, or truck. The latter two of these options come at an added cost.
Here’s the catch…
Today, producers really only have two options: rail and truck. Remember, North Dakota only has a pipeline capacity of about 443,000 barrels per day.
That point was reached as far back as July of 2011!
By 2017, the state will more than double its pipeline and refining capacity over its 2013 levels, far outpacing the growth in oil-by-rail.
More importantly, these projects won’t encounter the same excruciatingly slow delays that TransCanada is having in getting a green light for its Keystone XL pipeline.
The smart money, however, isn’t necessarily in the companies physically laying pipe all over the state. Rather, the opportunity for you lies in a play that helps these companies bypass the contentious debate over whether these pipelines are safe.
It’s one of the few win-win situations for individual investors, no matter how high or low crude prices move — and I’ll send you my full report on this burgeoning investment this Thursday morning.
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.
