Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Trump Manchurian President Embarrasses Putin By Farcically Blowing his Russian Agent Cover - 19th Jul 18
The Fonzie–Ponzi Theory of Government Debt: An Update - 19th Jul 18
Will the Fed’s Interest Rate Tightening Trigger Another Financial Crisis? - 18th Jul 18
Stock Market Investor “Buy the Dip” Mentality is Still Strong, Which is Bullish for Stocks - 18th Jul 18
Stock Market Longer-Term Charts Show Incredible Potential - 18th Jul 18
A Better Yield Curve for Predicting the Stock Market is Bullish - 18th Jul 18
U.S. Stock Market Cycles Update - 18th Jul 18
Cayton Bay Hoseasons Caravan Park Holiday Summer 2018 Review - 18th Jul 18
What Did Crude Oil - Platinum Link Tell Us Last Week? - 17th Jul 18
Gold And The Elusive Chase For Profits - 17th Jul 18
Crude Oil May Not Find Support Above $60 This Time - 17th Jul 18
How Crazy It Is to Short Gold with RSI Close to 30 - 16th Jul 18
Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18
Stock Market Uptrend Continues, But... - 16th Jul 18
Emerging Markets Could Be Starting A Relief Rally - 16th Jul 18
(Only) a Near-term Stock Market Top? - 16th Jul 18
Trump Fee-Fi-Foe-Fum Declares European Union America's Enemy! - 16th Jul 18
US Stocks Set For Further Advances As Q2 Earnings Start - 15th Jul 18
Stock Market vs. Gold, Long-term Treasury Yields, 10yr-2yr Yield Curve 3 Amigo's Update - 15th Jul 18
China vs the US - The Road to War - 14th Jul 18
Uncle Sam’s Debt-Money System Is Immoral, Tantamount to Theft - 14th Jul 18
Staying in a Caravan - UK Summer Holidays 2018 - Cayton Bay Hoseasons Holiday Park - 14th Jul 18
Gold Stocks Summer Lows - 14th Jul 18
Trump US Trade War With China, Europe Consequences, Implications and Forecasts - 13th Jul 18
Gold Standard Requirements & Currency Crisis - 13th Jul 18
Focus on the Greenback, Will USD Fall Below Euro 1.6? - 13th Jul 18
Stock Market Outlook 2018 - Bullish or Bearish - 13th Jul 18
Rising Inflation is Not Bearish for Stocks - 13th Jul 18
Bitcoin Picture Less Than Pretty - 13th Jul 18
How International Observers Undervalue the Chinese Bond Market - 13th Jul 18
Stocks Trying to Break Higher Again, Will They? - 12th Jul 18
The Rise and Fall of Global Trade – Redux - 12th Jul 18
Corporate Earnings Q2 2018 Will Probably be Strong. What This Means for Stocks - 12th Jul 18
Is the Relative Strength in Gold Miners to Gold Price Significant? - 12th Jul 18
Live Cattle Commodity Trading Analysis - 12th Jul 18
Gold’s & Silver’s Reversals’ Reversal - 12th Jul 18
The Value of Bitcoin - 11th Jul 18
America a Nation Built on Lies - 11th Jul 18
China, Asia and Emerging Markets Could Result In Chaos - 11th Jul 18
Bullish Gold Markets in the Big Picture? - 11th Jul 18
A Public Bank for Los Angeles? City Council Puts It to the Voters - 11th Jul 18
Yield Curve Inversion a Remarkably Accurate Warning Indicator For Economic & Market Peril - 11th Jul 18
Argentina Should Scrap the Peso and Dollarize - 11th Jul 18
Can the Stock Market Close Higher For a Record 10th Year in a Row? - 11th Jul 18
Why Life Insurance Is A Must In Financial Planning - 9th Jul 18
Crude Oil Possibly Setting Up For A Big Downside Move - 9th Jul 18
BREAKING: New Tech Just Unlocked A Trillion Barrels Of Oil - 9th Jul 18
How Trade Wars Penalize Asian Currencies - 9th Jul 18
Another Stock Market Drop Next Week? - 9th Jul 18
Are the Stock Market Bulls Starting to Run? - 9th Jul 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Three Energy Charts That Should Scare the Bejeezus Out of You

Commodities / Crude Oil Jan 09, 2011 - 10:44 AM GMT

By: Sean_Brodrick

Commodities

Best Financial Markets Analysis ArticleAfter surging into the end of the year, oil and oil stocks have pulled back. Why?

• It’s certainly not global economic fundamentals, which are improving, with car sales rising and unemployment dropping.

• It’s not oil inventories — U.S. oil stockpiles dropped 20 million barrels in a recent one-month period.


• It’s not expectations of global oil demand — which keep getting yanked higher for 2011.

The reason crude crumbled earlier this week was simple profit taking. We could see some more profit taking in the short-term. But all the things I’m watching tell me we could be headed for much higher crude oil prices — at least $105 a barrel in the first half of 2011, and potentially $130 or higher later in the year.

That means this pullback is a golden opportunity in sweet, black crude.

Why do I think crude oil is headed higher? Let me show you three charts. As a consumer, they scare the heck out of me. As an investor, they tell me there’s money to be made in the oil market.

Chart #1: Mexico’s Oil Production Is Lower … Lower …

Mexico's Oil Exports Slump Lower Every Year

Mexico’s crude oil exports dropped again in 2010, continuing a 4-year, 27% drop in that country’s oil exports, which peaked in 2006. Leading the charge lower is a cliff-steep drop in production in Mexico’s super-giant oil field, Cantarell.

This is bad news for the United States because Mexico is our #2 supplier of imported oil.

The U.S. Energy Information Administration (EIA) expects that Mexico’s oil production will drop again in 2011. At the current rate of decline, the EIA expects Mexico will become an oil importer in 2015. But other independent experts say Mexico’s oil crash is coming a lot sooner — by 2014, or maybe even 2013.

Since the oil market discounts the future, oil traders will start pushing up oil prices far in advance of Mexican exports hitting bottom.

Chart #2: Drilling Is Drying Up in the U.S. Gulf of Mexico

The Obama administration lifted its offshore drilling ban months ago, and the U.S. government is making a lot of noise over the fact that the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) is going to expedite drilling approvals for 13 companies.

But the damage has been done. Many shelved projects won’t come online for a long time. Experts say the wait could continue until the second half of this year, and maybe into 2012.

It’s not only deepwater drilling that is impacted. Even shallow-water drilling rigs are cooling their heels. The combined effect brings us to the next chart:

U.S. GoM Rig Count

On the far right of the chart, you can see that drill rig counts were dropping anyway. They started to climb last year, only to swoon after BP’s Deepwater Horizon explosion in the Gulf of Mexico.

It’s a trend that continues. In the last week of December, the U.S. offshore rig count dropped 4% from the previous week — but it was down a whopping 42.86% year over year. In the latest example, contract driller Noble Corp. said Monday that Marathon Oil Co. is cancelling a four-year, $752 million contract to lease an ultra-deep-water rig in the Gulf of Mexico.

If rigs aren’t drilling, those offshore fields won’t be producing. The EIA says that U.S. oil production from the Gulf of Mexico should drop by 170,000 barrels a day in 2011.

To be sure, the BP Deepwater horizon oil spill was one of the greatest environmental disasters this country has ever faced, spewing 4.9 million barrels of oil into the Gulf of Mexico. Personally, I’d be happy to see BP executives thrown in prison. But we are sacrificing our future energy security if we don’t tap the oil in the Gulf, and naturally, less supply means higher prices.

Speaking of higher prices …

Chart #3: U.S. Gasoline Prices Head for $4 a Gallon (Again)

In this next chart from dshort.com, the two-year trend in U.S. gasoline prices becomes painfully clear:

Are gas prices headed back to old highs?

This is an ugly trend that affects nearly all Americans. I think we’re headed back to $4 a gallon gasoline, and maybe higher than that. For a nation designed around the automobile, that is downright dangerous.

But there’s one nation that is catching up to us in our car-crazy gasoline use. That country is China, which now buys more new cars per year than the United States.

China’ year-on-year oil demand rose 6.7% in the first 11 months of 2010, including a 12% rise in October and 15% in November. We don’t have the data on December yet, but as you can see, not only is China using more oil, its demand is accelerating!

And the Chinese don’t have to worry about the chart above because gasoline prices are strictly regulated by the Chinese government.

Do I mean the Chinese government will subsidize gasoline prices to keep its citizens happy? Yes, that’s exactly what I mean. And China has the cash do it — after all, we send them more and more of our money every day.

It’s Time to Take Action!

Oil and gasoline prices are being squeezed higher by a combination of tight supplies and increasing demand. The trend is clear. What’s not clear to many is what to do about it.

You can buy a bicycle (I recommend that — everyone could use the exercise). You can curl up in the fetal position (I don’t recommend that). Or you can take charge of your investing destiny and buy a basket of the best stocks and funds to ride the coming surge in oil prices.

Not all energy stocks are created equal. There will be some real winners in the coming energy crisis — as well as some stocks I wouldn’t want to touch.

You can do your own research, which is always a good thing. Or you can hop on the profit train as I put together MY best picks in a new energy report, Burning Oil: 7 Winners in the Next Energy Boom.

The report is packed with analysis, insight, and my picks of the best oil picks to power up your portfolio. What’s more, I’m including three follow-ups with a subscription to the initial report.

The report comes out one week from now. If you buy it now, you can get it at a HUGE discount.

For details on what’s coming in my report, Burning Oil: 7 Winners in the Next Energy Boom, point your web browser here. And whatever you do, I don’t recommend you ignore the coming energy shock. It’s best to prepare your portfolio and your life for the higher prices ahead.

Yours for trading profits,

Sean

P.S. This is an incredible opportunity — don’t waste it. The next oil shock is coming whether you like it or not. You can invest wisely and cushion yourself against rising prices … or you’ll wish you had. Don’t wait! Get onboard today.

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules