The “Ouching” Felt 'Round the World

Although Saudi Arabia’s energy minister isn’t a Nobel Prize laureate, his message was clear as day:

I keep advising them that they will be ouching — they did ouch in April. I don’t have to show my cards; I am not a poker player… but I would just tell them watch out.

These words from Energy Minister Prince Abdulazizi bin Salman may not sound overly harsh; perhaps the ferociousness is lost in translation. Regardless, this “ouch” could soon be felt all around the world. 

This was his message to oil speculators in the market. 

And truth be told, they would do well to listen.

Why?

Well, it all comes down to one tiny little problem…

To cut or to not cut — again.

That’s the decision OPEC is going to make at its next meeting on June 4, 2023. In reality, it’s actually a much easier decision than you might first believe.

One might think OPEC would want to further slash output to offset rising Russian exports. Back in March, Russia exported more crude oil and petroleum products than it had since April 2020. 

But the Saudis don’t really care if Russia squeaks out a little more oil. There is no shortage of buyers of Urals crude, the main grade of oil Russia exports. 

In a way, countries like Saudi Arabia are capitalizing on more Russian oil products on the market right now. 

Think about it…

The Saudis are able to buy up Russian diesel at extremely steep discounts and then use it domestically, opening up more room for oil exports. 

For China, India, and countries like Saudi Arabia, it’s a win-win.

But in today’s market, there’s a crucial reason why the Saudis are in a far better position to control global oil prices than ever before. 

The cold, bitter truth to swallow is that the U.S. has lost its status as a global swing producer.

The Newest Oil Frontier Isn’t So New

A swing producer in the oil market is simply one that is able to increase or decrease its crude supply at minimal additional cost. Although this goes for most commodities, it’s critically important in global oil markets. 

After the tight oil and gas boom erupted in the United States back around 2008, we quickly became the most important swing producer of oil in the world. 

To give you an idea of just how important we were to global supply, just remember that our domestic oil production more than doubled from 5 million barrels per day in 2008 to a peak of just over 13 million barrels per day right before the COVID-19 pandemic began.

There was a drilling frenzy that gripped the U.S., and it struck fear into the hearts of young Saudi princes. 

Year after year for more than a decade, our oil drillers were able to unleash a flood of oil out into the world. 

Today is a much, MUCH different story. 

I’ve told you before that the shale boom is over and the U.S. oil and gas industry is transitioning into a new era — one marked with profits over debt-fueled drilling.

In other words, we may not see U.S. output top 13 million barrels per day for a long time… if we ever do!

With production stalled around 12.3 million barrels per day, we’ve lost our place as the world’s swing producer. 

Now, the only countries with any significant production capacity are Russia and Saudi Arabia. The historic sales from the SPR in 2022 were a one-time tool that is no longer in President Biden’s utility belt. 

But perhaps there is a glimmer of hope left out there… 

Something that could break the stall and take U.S. production to the next level.

We'll talk about that part next week.

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.

P.S. Big Oil doesn’t believe in the future of fossil fuels.

Oil companies must invest $525 billion per year to keep pace with demand growth…

But they’re doing the exact opposite.

Each year, they’re spending about $500 billion less than they were in 2014.

But that’s not all: Not a single major oil refinery has entered production in the U.S. since 1977. That was 46 years ago!

Big Oil MUST find new ways to make money.

It’s why they’re scooping up companies specialized in alternative fuels left and right.

I've found an off-the-radar company from Colorado that could be Big Oil’s next profitable acquisition target.

With this company being about 700 times smaller than Chevron, shares could go parabolic the day this story goes public.

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