The Oil War Is Back on — Invest Accordingly

The Saudis smell blood in the water, and they’re circling. 

Normally I try to be polite and include the other 12 countries that make up the traditional OPEC members, or at least add a few major players within the OPEC+ alliance like Russia. 

However, it’s clear that the House of Saud is in charge. 

Two weeks ago, we talked a little bit about the “ouching” that would soon be inflicted upon speculators; it was a threat levied by a Saudi energy minister that people gave little attention. 

I can’t say I blame anyone for brushing it off. The story was grossly overshadowed by the feeding frenzy in the media over the debt ceiling. 

So when the Saudis announced a voluntary cut of 1 million barrels of oil per day, people finally started paying attention. 

Unfortunately, it was way too late to do anything, and U.S.-Saudi relations have deteriorated to the point that nothing would’ve prevented the production cut.  

But there’s still hope for investors… and a beacon of light still shining brightly in the oil markets.

First, you have to understand why this situation is so dangerous. 

As I’ve said time and again, the United States has lost its place as a global swing producer. In other words, we’ve lost the ability to raise oil output over the short and medium term. 

While it’s true that U.S. crude production has been rising since the COVID lockdowns officially ended, our output has only climbed back to 12.4 million barrels per day. In 2022, U.S. field production of crude oil grew a little under 6% year over year.

Keep in mind that this growth took place during a time when oil prices were at nearly all-time highs due to the Russian invasion of Ukraine — oil companies were hauling in cash hand over fist, which spurred more drilling. 

One of the key metrics to follow when anticipating future oil output is the Baker Hughes weekly rig count. It’s a rich data resource that breaks down all the details of U.S. oil and gas drilling activity. 

Because the oil sector doesn’t just turn on the taps overnight, the rig count gives us insight into how production is trending — and the most recent rig count should give any bear cause for concern. 

Just take a look for yourself:

As of last Friday, there were 555 rigs drilling for oil in the United States, which is 19 fewer rigs out in the field than there were a year ago. 

Although this is more than double the number of active oil rigs than during the height of the pandemic, we’re nowhere near the 680 rigs that were churning U.S. soil in March 2020, just before the COVID-19 lockdowns took effect. 

Back then, our domestic output was at an all-time record 13 million barrels of oil per day. 

But the shale boom times are over, dear reader. 

And what’s worse is that the Saudis know this. 

However, as I hinted at above, there is a silver lining for investors. 

You see, there’s one intensely profitable corner of the oil industry right now, and it’s one that will help rake in a fortune for a small group of elite oil stocks. 

In fact, these little investment gems are the lifeblood of the American economy, and every day that oil stays below $80/bbl raises their profitability. 

This is an opportunity I strongly recommend you check out for yourself firsthand.

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.

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