I missed a special anniversary two weeks ago, one that I manage to miss every year without fail…
September 14.
At least I’m not alone. In fact, I happen to know at least four oil executives who also manage to overlook this date each year, including Bob Dudley, John Watson, Peter Voser, and Rex Tillerson.
You might recognize these names as the CEOs of the remaining “Seven Sisters,” a term created more than 60 years ago for the world’s largest oil companies. The group has since been whittled down to just four today: BP, Chevron, Shell, and ExxonMobil.
The truth is we’d all prefer to forget about the 14th of September, because it was on that day 53 years ago that an oil cartel was born…
Until that day, the Seven Sisters had shaped the world’s oil supply. Just 13 years after OPEC was formed, the cartel was successful in wresting control from the powers that were — hence their collective bitterness towards that infamous September date.
Today, the power structure looks much different, with national oil companies controlling roughly 95% of the world’s crude supply.
Over the next few decades, however, that immense power will be up for grabs once more as another shift takes place. The winner this time around might come as a surprise.
It will all come down to OPEC’s breaking point.
OPEC’s Breaking Point
On the surface, everything seems fine and dandy for the oil cartel. But that’s what they need you to think.
OPEC oil exports overall will be slightly higher this month, amounting to about 24 million barrels per day.
But in the wake of the geopolitical mess encompassing the Middle East and North Africa, the Saudis will try to step up and fill in the gaps.
One of the more recent disruptions involved a labor conflict in Libya, forcing Saudi Arabia to increase exports to slightly over 10 million barrels per day. While that’s not a drop in the barrel — and I’ll even be optimistic for a moment and pretend the Saudis will have no problem making up for the loss of supply elsewhere — it’s not the size of their exports that are troubling…
It’s the quality.
Oil is oil, right?
Not exactly. A good look at the quality of Saudi Arabia’s spare capacity — which isn’t the light, sweet oil refiners yearn for — and we know the quality of the crude can make all the difference…
Perhaps you remember when the Saudis had to make up for the production loss due to unrest in Libya a few years ago. We watched as European refiners that were accustomed to high-quality crude from Libya weren’t able to handle the heavy spare capacity from Saudi Arabia.
Make no mistake about it; Mideast oil supply is a ticking time bomb.
And its detonation will cause a sudden power shift in the oil industry.
The Unconventional Power Shift Ahead
The next generation of global crude production comes down to just two words: tight oil.
If you caught a peek at this IHS report last week, you certainly saw this resource’s potential. The numbers in the report were pretty staggering, with 300 billion barrels of technically recoverable oil held within 148 tight oil plays across the globe.
Now, if there’s one axiom for anyone with a dime invested in the oil industry, it’s this: A barrel of crude is absolutely worthless if you can’t get it out of the ground.
Fortunately, that isn’t the case for Texas.
And if we take a deeper look into Texas’ oil supply, we’re going to see a clear-cut winner emerge…
Only 13 counties in the Lone Star State that have produced more than 10 million barrels of oil since we rang in the New Year — and only five of those counties were able to pump out more than 15 million barrels. However, a single county was successful in doubling that amount — producing nearly 31 million barrels during the last eight months.
Nestled in the sweet spot of the Eagle Ford Shale, Karnes County was practically non-existent up until two years ago…
Today it’s on fire.
Let me put it another way: If the 24 counties sitting on the Eagle Ford made up their own state, they would be the third largest producer in the country!
Personally, I don’t plan on waiting around for OPEC to crumble. The truth is investors who don’t play the shale boom now will miss the biggest payouts, certainly by the time we witness the cartel’s breaking point.
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.
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