OPEC Takes Control

Two Saudi oil princes sat in a room surrounded by a mountain of cash. Thumbing through the bills, the one looks at the other just before he loses count and says, “I love it when a plan comes together.”

The other simply smiles and nods. 

I can think of several times this fictitious scenario has played out in history, and each time the story ends the same way. 

The reason for their recent mirth comes as Saudi Arabia officially raised the price of its oil deliveries to Asia next month; the cost of a barrel of Arab Light grade crude will be sold at a $1.70/bbl premium over the Oman/Dubai average. 

It’s still early March and oil prices are already rising… the Saudi plan is coming together nicely, indeed.

Perhaps a few of you are starting to wonder just how we got here.

Well, that’s the easy part. 

Honestly, we’ve been waiting for the other shoe to drop ever since President Biden sold off more than half of our strategic petroleum reserves in 2022. 

To be fair to the President, it was perhaps the only way he was able to keep a lid on oil prices after Russian tanks started rolling into Ukraine. If he hadn’t made that move, oil prices would’ve spiked far higher than the $120 per barrel that summer.

Still, it was a short-term sacrifice for long-term pain. 

So where do the Saudis come into play here?

Like I said, that’s actually the easy part to answer. OPEC and its allies (mainly Russia) have been voluntarily curtailing production in late 2022 to maintain the global supply/demand balance. It was a counter to the massive SPR release by the U.S., and all they had to do was wait us out. 

Of course, one kink in their plans was the surprise production growth by U.S. producers, which pushed our domestic production to a new record of 13.3 million barrels per day in 2023. Hardly anyone saw that coming, and it was the only thing that kept global supply higher. 

They knew it wouldn’t last, and as long as they stuck to their production cut, then things would eventually work out — especially considering that global demand not only reached new all-time highs in 2023, but are also poised for even more growth this year. 

Again, all the Saudis had to do was wait us out. 

Now it’s time to collect.

They understand full well who’s driving demand this year. The latest data out of India shows that demand is hitting new highs. More importantly, India will be the greatest driver of global oil demand for the rest of the decade. 

Meanwhile, Chinese refineries are processing more crude oil than ever before:

The Saudis are now in a win-win situation heading throughout the rest of 2024 because non-OPEC supply growth is severely limited. Remember, U.S. oil production is expected to decline from 13.3 million barrels per day and not reach that level again until next year. 

Keep in mind that when the summer demand comes rolling around again, President Biden won’t have the same tricks available to him… or will he? 

Don’t be surprised if he tries to tap the SPR again if things get tight and crude prices surge higher, but that might be political suicide during an election year, not to mention a huge blow to our energy security. 

I know it sounds bad, but the smart investors will see the opportunity if they look hard enough. 

You see, my readers and I know that the game has changed within the U.S. oil sector. Gone are the days of frenzied, debt-fueled drilling, when companies would sink as many drill bits into the ground as the bank would pay for. 

Today, it’s about getting more with less. 

Less drilling. Lower costs. Fewer rigs. 

Efficiency is what’s going to keep U.S. oil flowing at near record levels this year. Naturally, that puts an incredible amount of value on the oil stocks that can pump more with less. 

Those will be the true winners this summer. 

And I think it’s time you check at least one of them out right now.

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.