You don't always need to pump, transport, or sell oil to make a profit. Sometimes you just need to hold it.
What follows should be good news to the commodities side of Goldman Sachs Group Inc. (NYSE:GS-A). Unfortunately, this has not been a good two weeks for the company. First a fraud charge. Then the release of damaging internal E-mails. Too bad, because their oil traders may have just hit the jackpot.
Goldman is one of the leading traders in commodities in general and crude oil in particular. The trading side of the house has been betting heavily on oil in storage, and that is soon to pay off nicely. I'm about to explain why those profits are shortly going to flow.
Please, feel free to join in on the action. This will be a quick in and out.
It's all about what is taking place in a somewhat dull little town in north central Oklahoma. No, that's not really accurate – it is an extremely dull little town. Believe me, I know, having spent two of the most boring years of my young life there. Not much to commend it – except for the fact that this little community of barely 8,000 people just happens to be where Gulf Coast oil supplies meet northern refinery needs.
As it turns out, that is a very big deal.
This is the town of Cushing, Oklahoma, the most important U.S. oil hub representing a major intersection of pipeline systems. Here, oil prices for West Texas Intermediate (WTI) benchmark crude rate deliveries are set, the same ones quoted on NYMEX in New York City.
The boys at Goldman are on to it. And in about 750 more words, you will be, too...
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About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.