Forget OPEC.
I realize these may not be the words people expect to hear when discussing the global oil complex…
But if things continue as they are right now, the 12-member oil cartel might as well pack its bags.
Even setting aside the shady reserve increases in the past, the group apparently has a bigger issue to solve.
Geopolitics is dragging down production.
Last month, estimates pegged OPEC’s crude output at ~29.4 million barrels per day, or roughly 600,000 barrels per day less than the quota they set.
That’s the lowest production rate for OPEC in more than two years.
The problems are easy enough for us to pinpoint, with production slumps occurring in the geopolitical hotspots of Iraq, Libya, and Nigeria.
The Saudis have always just swooped in to boost field production to make up for the supply loss (we won’t mention the issues over quality that come to mind). But how many times will this occur before they reach a breaking point?
Or have they already?
A few months ago, a multi-decade record of more than 10 million barrels per day was flowing from Saudi wells. But the party didn’t last long, with production tumbling nearly 4% since.
And compounding the Saudis’ frustration is the million-barrel daily jackpot we struck in the Midwest — one that has led to the only sure bet in today’s crude markets…
The Million-Barrel Daily Jackpot
As you know, the Williston Basin is home to the Bakken Formation, which has practically become a household name since the USGS reassessed the resources in this region back in 2008.
While production from wells drilled into the Bakken steadily march toward the one-million-barrels-per-day threshold, the truth is production from the entire basin has already surpassed that mark. We must take into account the 931,000 barrels flowing out of North Dakota each day, and add these to the production from other areas of the Williston Basin (in eastern Montana and South Dakota, which total more than 75,000 and 5,000 barrels per day, respectively).
And there’s another reason to go after the oil-rich shale formations spread across the lower 48 states…
Our new supply comes with an added bonus compared to the heavy oil that makes up Saudi Arabia’s existing spare capacity.
Truth is, we’ve got both quality and quantity at our fingertips.
This attractive U.S. crude supply opens the door for the only sure bet in oil in 2014.
The Only Sure Bet in North American Oil Profits
How many times over the last few years have we given away the only win-win game in the oil markets?
I know, it sounds almost too good to be true. But I’ll show you why the best is yet to come.
Right now, there’s only one major obstacle for these Midwest producers, and it isn’t pumping oil out of the ground. No, the struggle for companies in the Bakken is getting this supply to market.
Think about it: More than six of every ten barrels produced in the Williston Basin are shipped via rail.
For the record, that share actually increased by about 5% since last year.
More importantly, this trend will continue as oil production in the area continues to jump.
Believe me, it wasn’t a coincidence that Warren Buffett was willing to part with $26.5 billion for Burlington Northern Santa Fe three years ago. But his isn’t the only horse in the race, and over the past year, Canadian Pacific has helped transport the roughly 600,000 barrels of oil that head out of the Bakken by rail.
How did Canadian Pacific fare against Big Oil?
(Note: ExxonMobil’s $41 billion shale deal for XTO Energy dwarfed Buffett’s $26.5 billion rail bet.)
I’ll let you decide…
So far this year, it hasn’t even been close.
Pipeline constraints will only grow tighter as we move past the million-barrel-per-day benchmark, making these “pipelines on wheels” more critical than ever for companies willing to pay a premium to reach refiners.
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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