Saudi Capitulation

OPEC won’t act alone.

At least, that was the general principle behind the 12-member oil cartel’s decision to leave output steady last November.

Realistically, however, it was the Saudis’ decision, not the whole group’s.

In other words, the Saudis don’t want to be the only country to reduce production, which is why they’ve called for both Russia and the United States to also cut output. At last count, the Saudi kingdom was pumping around 10.3 million barrels per day.

We can’t rightly blame them for wanting the U.S. to join them in cutting production. After all, the United States hasn’t produced this much oil in over four decades. Even Russia is producing oil at near-record levels.

And right now, we can’t think of a better buying opportunity than bottoming oil prices.

The Inevitable 2015 Oil Rally

Forget the media hype for a moment, and let me tell you why the Saudis will cut production in 2015.

If we know the Saudis are prepared to capitulate on lower output in the U.S., then we can prepare ourselves for an oil price rally in the second half of 2015 — because that’s precisely what’s about to happen.

As most of my readers are well aware by now, only a handful of tight oil regions accounted for more than 90% of domestic oil production growth in the United States between 2011 and 2013. In fact, roughly 55% of our total oil output is extracted in just two states!

And after a string of monthly production increases, the Energy Information Administration expects oil production in two of the largest oil-producing regions — the Bakken and Eagle Ford — to decline by 56,000 barrels per day next month.

Adding more bullish sentiment into the mix, Baker Hughes once again reported another drop in the U.S. rig count, which stood at 988 rigs last week. To put a little more perspective on that number, just remember that more than 600 rigs have gone idle since OPEC decided not to cut output.

But to give you an idea of how close we are to a bottom (if we’re not already there!), consider that this is the lowest number of rigs drilling for oil and natural gas on U.S. soil since 2009.

Between reduced drilling activity and capital spending being slashed across the board by drillers, you don’t need a crystal ball to see the production declines ahead.

What you do need, however, is to realize that the current drilling slowdown underway in the Lower 48 could be the necessary catalyst for the Saudis to respond.

One Saudi official recently said that global demand will rise to 105 million barrels per day over the next 10 years, even suggesting that it could rise by as much as one million barrels per day this year.

So there’s only one thing left to do…

How to Invest in an Oil Rally

Close your eyes for a moment and think back to a period similar to today — a time when oil prices felt like they couldn’t possibly go lower and when the entire energy sector languished in misery from sharp declines.

It was in February of 2009.

Those of you that were invested in energy as far back as the summer of 2008 should be experiencing déjà vu right now. If you aren’t getting that feeling yet, perhaps this might help jog your memory:

Yet for all the pain individual investors like us had felt by February of 2009, shortly after WTI prices bottomed at $33 per barrel, there was a silver lining to be sure — one of the greatest buying opportunities in decades.

Oil prices rebounded to around $80 per barrel by 2010. There was a resurgence in drilling that helped push U.S. domestic oil output to well over 9 million barrels per day today.

By successfully calling the oil bottom back then, you could have randomly picked a dozen oil companies out of a hat and potentially doubled, even tripled your initial investment.

And that’s where we find ourselves today.

I’ve said before that it’s no longer a question of “if” but rather “when” the Saudis let OPEC cut output. After all, we’re finally beginning to see U.S. tight oil production growth slow, aren’t we?

That alone has helped prices of both WTI and Brent crude rally nearly 20% since mid-January.

Still not sure how to take advantage of bottoming oil prices?

Here’s an easy way you can start.

Until next time,

Keith Kohl

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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.