The Reality Behind What’s Driving Oil Stocks Higher Today

Let’s get back to reality, shall we?

A week ago, I wouldn’t have believed there were so many experts in carry trades out there. It’s a fascinating thing to watch, really. I would be more interested in knowing how many of those “experts” even knew what one was prior to this recent crash. 

Within a few days, people were certain that it was that the unwinding of the yen carry trade; or it was the U.S. collapsing from a sudden recession spurred by the poor jobs report; or it was something else entirely that caused this recent market crash. 

For us, it was an opportunity for individual investors everywhere. 

Don’t feel left out just yet.

Watching WTI crude prices fall into the low-$70s was like Christmas coming early, and now it’s time to unwrap our presents. 

There’s a reason why it didn’t take long for oil prices to recover this week. As I write this now, WTI grade crude is trading back above $75 per barrel; Brent is slowly creeping back up to $80 per barrel. 

For anyone paying attention to the geopolitical risk factors in Venezuela and Iran lately, it might’ve been enough to turn a neutral observer bullish. 

Yet, those are wild cards — well, not so wild these days. When it comes to the risk premiums added to the price of oil, the market will price in that fear appropriately (or not). 

In other words, those are potential catalysts that will tack on risk like a coiled spring waiting to push crude higher on the drop of a hat. You’re going to see this happen firsthand the moment Iran decides to retaliate against Israel… an inevitability at this point. 

The only question now is how severe the attack will be. Place your bets now. 

Fortunately, we can focus on something a little more concrete that makes us bullish on oil — doing so will help point investors in the right direction.

At the risk of sounding like a broken record, I’ll lead you over to the supply/demand fundamentals to help guide your portfolio. 

Simply put: Things are tight, and they’re going to get tighter.

At least, that’s the sentiment one should get looking deeper into the EIA’s numbers. No, I’m not referring to the weekly data they put out, which we already take with a grain of salt. 

Yesterday’s This Week in Petroleum suggested that U.S. production had reached 13.4 million barrels per day. Given that their weekly numbers are based on the EIA’s projections, your guess is as good as theirs as to actual output. 

Now you understand why the EIA is forced to go back and revise its monthly reports like clockwork. 

Look at the bigger picture for a moment, and you’ll find that global demand outstripped supply in June by about half a million barrels per day. THIS is why it’s so easy for oil to rally this week.

Here’s where it gets interesting…

We can go back and forth for hours on more bullish dynamics, whether it’s record demand in India or the fact that U.S. oil consumption is sorely underestimated. The point is that demand is healthy. 

The supply side of the equation isn’t so lucky. 

Between the steadily declining number of rigs actively drilling for oil in U.S. fields and an administration that has been hostile toward the drillers, companies in the crude sector know that the game has changed in the oil patch. 

You see, it’s no longer about feverish, debt-fueled drilling trying to put as many holes in the ground as humanly possible. 

Today, it all comes down to one thing — efficiency. Every single oil driller in the field wants to reduce the time and costs it takes to drill a well, which is why we’ve seen longer and longer laterals over the last several years. 

More with less… that’s the mantra humming inside the heads of every oil executive in the country. 

For the bigger whales in the U.S. oil industry, they’re in the fortunate position where they don’t have to reinvent the wheel — they just have to buy the person that did!

That’s why we saw Exxon buyout Pioneer Natural Resources for $60 billion, or Chevron scoop up Hess for $53 billion. 

The pool of those investment gems in the oil sector is getting smaller every year, and it’ll continue to do so well into 2025. 

Maybe it’s time you take a moment and see who may be next… before it’s too late.

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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