The Time Has Come for This Surprise Oil Trade to Shine

Revenge is a dish best served cold.

Let’s all just admit that we’re incredibly spoiled when it comes to energy. You may not want to say it out loud, but every night when you look in the mirror you won’t be able to hide from the truth. 

Mind you, this spans across much of the energy sector. 

We’ve been blessed with massive reserves of coal that fueled American growth during the late 19th and 20th Centuries. By the 1960s, it had become a vital source of our electrical generation. 

Our natural gas resources are second to none on the planet, and we’ve taken full advantage of it during the shale gas boom. Thanks to plays like the Marcellus Shale, the U.S. is the world’s largest producer of natural gas. 

Because of that, we are now a major player among the world’s largest LNG exporters ensuring energy security to places like Europe. And our gas production is so plentiful that prices have been dirt cheap for more than a decade. 

And then we have our crude oil fortunes. 

Nowhere else in our history have we seen a comeback story like the U.S. oil industry. By 2007, most people had written off our domestic oil production and accepted our fate of being shackled to OPEC oil for generations.

That is, until the tight oil boom not only reversed our decades-long production decline, but had also thrust us into the position as the world’s biggest oil producer. 

It’s a good place to be… but not for everyone. 

Our sudden access to a huge source of crude changed a few things. 

For starters, we were able to free ourselves from our growing dependence on OPEC oil. We had so much access to light, sweet crude locked in our tight oil rock formations that Congress was forced to reverse a 40-year export ban so we could ship our crude to new markets. 

But there’s another side to this story.

Despite the huge output growth we’ve enjoyed since 2008, we were still very much addicted to another source of crude — the heavy oil that was flowing south from Canada. 

You see, much of our refining capacity along the Gulf of Mexico is geared towards this poorer quality heavy crude from Canada. Light, sweet crude is great for making products like gasoline and jet fuel, but heavy oil is a vital feedstock for other petroleum products that are vital to our society. 

But we had an ace up our sleeves when it comes to finding our heavy oil supply. For decades, the U.S. has been the only real customer for Canadian oil companies.

And we knew that, which is why it traded at such a discount to WTI prices. 

In fact, our oil imports from Canada have been growing more than 44 years straight (with the slight exception during the COVID years). In 2023, we bought an average of 4.4 million barrels per day of Canadian oil. 

And now Canada’s revenge is at hand. 

The clock is ticking down, and things are going to get quite interesting at the end of May when the Trans Mountain Pipeline expansion is completed. Once finished, this $31 billion expansion project will boost the pipeline’s capacity by 590,000 barrels per day — triple its current rate. 

If you haven’t guessed by now, what this does is open up the Canadian oil sands to Asia’s market.  

And countries like China can’t wait to get their hands on this heavy crude. Sinochem has already bought its first cargo of more than half a million barrels of heavy crude, which will be shipped as soon as the expansion project is completed.

There’s a reason why Cenovus Energy, a major Canadian producer that’s boosting output by 20% over the next five years, remains one of my favorite oil plays in 2024. 

They’re certainly a good place to start your search, but I know for a fact that they aren’t the only investment that’ll start turning heads once more Canadian crude starts flowing across the Pacific. 

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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