This Is What an Oil Panic Looks Like… and Things Are About to Get Worse

Friends stick together… 

But what happens when your enemies start getting chummy?

In the oil market, it causes panic — and that’s exactly what we’re seeing right now. 

For years, the players have been recruited and the teams have finally formed, coalescing into two dominant sides that will battle back and forth to become the undisputed controller of global oil supply. 

In the past, it didn’t matter if the Saudis were our friends. 

It’s true!

Prior to 2008, we were hopelessly addicted to their crude oil. More importantly, they knew it; it was an odd relationship. We got their oil, and they got our weapons. 

Over the last 20 years, our imports from Saudi Arabia have plunged by 68%. Check it out for yourself:

Today, that dynamic has been flipped on its head thanks to the tight oil boom that single-handedly unshackled us from OPEC.

There aren’t many countries that can say they physically drilled their way out of OPEC’s crude grasp. 

That, dear reader, is what forced the Saudis to find a new whale. 

And China answered that call. 

This month, Saudi oil exports to China are projected to rise by 40% — but this is just the tip of the iceberg.

Why? 

Well, Saudi Arabia and China are finalizing a new deal that will flood the Middle Kingdom’s refineries with more Arab-grade crude than ever before. 

And the geopolitical situation for the United States couldn’t look any worse…

Russia, Saudi Arabia, and China — the unholy alliance that Washington, D.C., fears more than anything else — have become the best of friends:

Their symbiotic relationship benefits each of them in different ways. 

The Chinese get access to a massive amount of oil supplies, the Russians get to keep oil prices elevated to fund their war in Ukraine, and the Saudis get a new client with deep pocketbooks. 

Now they have us right where they want us. 

If you want an idea of just how desperate the U.S. government is to increase global supply and keep the markets balanced, look no further than Venezuela and Iran, both of which have been public enemy No. 1 for the last few years. 

That narrative in the media will surely change soon as sanctions on both countries are lifted, and we’re going to get front-row seats to that strategy backfiring. 

China’s President Xi Jinping just announced an “all-weather strategic partnership” with Maduro, which will include helping boost Venezuela’s beleaguered oil industry. 

Now here’s the real kicker…

The biggest driver of oil prices — the fundamental balance of supply and demand — is widening. OPEC just reported that it sees a supply deficit of 3 million barrels per day. 

And the market is finally starting to see this disparity is wildly bullish for oil as we head into the fourth quarter. WTI crude prices broke above $90 per barrel yesterday for the first time all year, and Brent crude is knocking on $94 per barrel. 

Crude has now risen more than 15% in the last three weeks, and things are going to get worse.

Stay tuned.

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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