The Dirty Truth Behind $100 Oil

Will Russia invade? Was the escalation simply a show of force to scare off any thoughts of Ukraine joining NATO? Is Moscow ready to come to the table for peace talks?

At this point, the entire situation over Russia and Ukraine seems to be more of a war for clicks in the media than a full-blown military conflict. 

No matter which pundit in the mainstream media is telling us they know what’s going on in Putin’s mind… nobody knows except the man himself. 

One thing we can be sure of, however, is that if Putin is going to do anything, he’s on a short timetable due to the spring thaw. 

So if you’re putting money on an invasion, it had better be within the next few weeks. 

If you’re trading oil stocks right now, be thankful that any de-escalation of the Russia-Ukraine situation is sending oil prices lower.

Why?

Because the dirty truth here is that you don’t want oil over $100 per barrel (I’ll tell you why in just a minute).

Unfortunately, it’s a little too late for that.

Keep Your Eyes on the Real Oil Story

Look, there’s no question in anyone’s mind that the geopolitical volatility enveloping Russia and Ukraine right now has the power to put immense pressure on crude prices — in both directions!

Just as fear and panic of an invasion can help boost crude prices over the short term, the recent stories of de-escalation pushed WTI prices down nearly 4% yesterday. 

That’s just part and parcel of the game, folks. 

And geopolitical instability is one helluva motivator for prices. 

But it’s also just a side story to what’s really driving oil prices. 

That, dear reader, is the good old power of supply and demand.

In 2022, we’re going to see global oil demand surpass its prepandemic levels. The International Energy Agency (IEA) is telling us that it will rise by 5.5 million barrels per day in 2021 and is set to increase by another 3.3 million barrels per day this year, climbing to around 99.7 million barrels per day. 

OPEC is a little more optimistic that we’ll see demand jump over 100 million barrels per day by the third quarter.

The other side of the equation may not be what you’re hoping to see. 

In January, global oil supply rose by more than half a million barrels per day to around 98.7 million barrels per day. 

Mark my words — a greater threat to oil prices isn’t Putin getting trigger-happy but rather OPEC’s and Russia’s inability to follow through on raising output. In its most recent Oil Market Report for February, the IEA noted that members of OPEC+ were chronically underperforming when it comes to meeting output targets.

More damning, however, is that the IEA was skeptical that many members of OPEC+ would be able to boost output, which puts a considerable strain on the rest of the group.

In fact, the main driver of global supply was — surprise, surprise — U.S. tight oil. Those drillers are projected to add 1.2 million barrels per day to U.S. output this year.

In case you’re wondering, that’ll be a new record for us.

Before you get comfy and start throwing darts blindly at a wall trying to find profits in oil stocks, there’s something you should know…

One-hundred-dollar oil isn’t all it’s cracked up to be.

You Don’t Want to See $100 Oil — Here’s Why…

I know what you’re thinking: Life will be a party with oil over $100/bbl. 

However, that couldn’t be further from the truth.

I hate to break it to you, but if you wanted guaranteed oil profits, you should’ve bought the moment oil prices turned negative back in April 2020. 

Or you could have gone all-in a year ago, when I told my readers that the most unexpected rally in 2021 would be in oil. At the time, I said we were in a perfect storm for higher oil prices. 

You could have even doubled down last fall, when I told you to buy oil now and thank me later. My readers who picked up Diamondback Energy that day would’ve seen their shares climb 50% higher over a few short months. 

Today, things are quite different. 

You’re not going to see the independent drillers in the Permian like Diamondback double in such a short period of time. 

And we can all thank $100/bbl oil for that. If history has taught us anything, it’s that $100/bbl is a psychological benchmark that is difficult to maintain for an extended period of time. 

Soon, when the media have had their fill of the Russia-Ukraine situation, the stories will once again be hyperfocused on record-high gasoline prices. 

Demand destruction will set in at some point, and those blindly betting on oil stocks will suddenly feel short of breath if their horse in the oil sector throws caution to the wind and irresponsibly burns cash like some did during the shale boom. 

No, you don’t want to see $100 oil, dear reader. If it were up to me, we’d keep prices unnoticed above $80/bbl and let oil companies enjoy the windfall of cash they’d be hauling in. 

Now, that’s not to say there aren’t winners to be had in the crude sector in 2022 — that’s far from the case! 

You just have to know where to look. 

Next week, we’re going to dive into the hidden gems still left in the oil patch.

Stay tuned. 

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.

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