Oil has bottomed… but we knew this already, didn’t we?
Granted, I’ve been telling readers this ever since March, when the price of West Texas Intermediate fell into the low $40 range. It’s difficult for anyone in the industry to think that oil would stay that low, especially given the fact that 86% of the world’s energy comes from fossil fuels…
Or that despite the fact that the share of non-petroleum sources in our transportation sector is at its highest level in 60 years, there’s still a tremendous mountain to climb to overtake crude oil.
Of course, I’m not the only one echoing this bullish sentiment for later this year.
My colleague Briton Ryle succinctly pointed out yesterday, “I know the market is screaming oil prices will fall, and it’s a bear market for oil. But the simple fact is the fundamentals are saying something very different.”
Make no mistake; the time is ripe for us to take advantage of a second-half oil rally.
OPEC’s New “Fair” Oil Price
Clearly the big news this week was OPEC’s decision to not cut production on June 5th.
It also marked one the first times in recent memory that OPEC hawks like Iran conceded that $75 a barrel is a “fair” price for crude right now.
Remember that up until now, cartel members like Iran and Venezuela have been adamant that oil should be north of $100 a barrel. That makes sense considering the former’s exports are tied up in sanctions and the latter’s oil reserves are of the poorest quality on earth!
But as you know, the Saudis reign supreme in OPEC. The Saudis account for about one-third of OPEC’s total daily output — so what they say goes.
Besides, the Saudis have a much more horrific nightmare to contend with: the United States.
Here’s why…
The U.S. Oil Rally Set for 2016
Are we setting ourselves up for a rally in 2016?
I think so… and so should you.
I know watching the oil rig count decline by four rigs this week doesn’t seem like a sudden catalyst to be bullish on oil — it isn’t.
But I want you to look at the bigger picture…
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The 642 rigs currently drilling for crude oil is the lowest the count has been in nearly five years.
Overall, there are 868 rigs actively drilling for oil and natural gas in the United States — a 12-year low!
Also consider that we’re going to continue seeing companies slash budgets during periods of low oil prices. In fact, upstream capital expenditure declined by 12% year-over-year during the fourth quarter of 2014.
During the first quarter of 2015, producers slashed spending between 20% and 25%.
Keep in mind, however, that total capital expenditures for many companies tripled between 2005 and 2014. Truth is, excluding the last few months of the year, 2014 was an amazing year for oil companies.
And regardless of what you may hear, U.S. production is starting to take a hit from the reduced drilling activity.
According to the EIA’s latest Drilling Productivity Report, output from the United States’ largest oil-producing regions are expected to drop — to the tune of 91,000 barrels per day.
Yet even though output is falling, the number of rigs is declining, and companies are scrambling to adjust their budgets, it’s not all doom and gloom out there for individual investors looking to capitalize on oil’s bottom.
And there’s one prolific oil play that will be the first to rally from bottoming oil prices: West Texas.
Stick to the Best, Profit More Than the Rest
Over the last two weeks, the Permian Basin added four rigs to its working count. And while this isn’t a knockout number by far, the area does have 232 rigs drilling for oil in the area — approximately 36% of the total number of rigs in the United States.
Taking one more glance at the image above, you’ll see that production in the Permian Basin actually increased slightly.
If you think you can’t make gains as oil bottoms, you might want to re-consider your position. Permian Basin operators like Laredo Petroleum have surged since we rang in the new year. Shares of Laredo have increased 71% since the first week of January.
And they’re not alone.
My readers and I have been following a small West Texas driller that has already delivered a 66% gain since early January. And not only is this tiny company sitting on more than 25 million barrels of crude oil, but it is also still actively drilling its targets in the Permian Basin despite low oil prices.
I recommend you take a moment and learn the full details behind this Permian oil player by clicking here.
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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