They called the Permian Basin the mother of all busts and buried it three decades ago – but they couldn't have been more wrong. Today, 27% of all of the oil rigs in the United States are currently operating in the Permian Basin.
To hear some analysts tell it, geopolitics and the weather are exogenous events when it comes to energy prices. That is, somehow crude oil prices would operate "rationally" if it weren't for either of them.
That type of thinking is costly. When investors disregard the weather, the geopolitical, or both, they lose money.
The price of oil has climbed slightly this week with West Texas Intermediate (WTI) hitting an intra-week high of $95.17 for October delivery today (Friday).
Despite this week's price hike, WTI prices are still well below the three-year high of $105 a barrel they hit in June.
Despite current geopolitical tension, crude oil prices have remained steady.
This dynamic tells us two things. First, traders are discounting the impact of geopolitical tensions in Ukraine, Gaza, and Iraq on overall availability. Second, other hotspots are having an immediate knock-on effect when it comes to crude supply.
WTI oil prices were down this morning (Wednesday) to a low of $97.06 for September contracts, after the Energy Information Administration (EIA) reduced its 2014 price forecast yesterday.
Citing increased oil production in the United States, the EIA dropped its 2014 forecast for WTI oil prices to $100.45 per barrel. In July, the EIA had projected a price of $100.98 per barrel.
But according to Money Morning's Global Energy Strategist Dr. Kent Moors, oil prices will be heading much higher in the long-term.
Two events this week indicate the situation in two global hotspots is getting worse, and both will have a significant impact on crude oil prices.
First, the Islamic State, the terrorist group formerly known as the Islamic State of Iraq and the Levant, attacked the Mosul Dam. Second, the mayor of Kiev in Ukraine turned off the hot water.
WTI crude oil prices settled back down below $100 per barrel this week, but according to Money Morning's Global Energy Strategist Dr. Kent Moors, oil prices may not stay that low for very long.
Today I want to tell you a story about energy – especially crude oil.
It involves my run in with the steak bandit…
Just stay with me here…
It begins last Saturday. On a trip to the local supermarket, I saw something you just don't see every day.
You see, I always do the grocery run. It is one of several clauses that have appeared over time in my marriage contract (no doubt about it, this is one document you need to read before signing!).
As I left the store, a crowd had formed outside. There were police all around and the parking lot had been sealed shut.
It turns out a fellow had shoved some steaks down his pants and made a dash for it.
By the time all of us had stretched our necks to see what was going on, the suspect was just sitting… in a car that wouldn't start… with the doors locked… and the windows up… in 90-degree heat.
All in all, he couldn't have been having a very good day.
Maybe he was that hungry. Or maybe he forgot his wallet at home and was late for a party. I'm not sure.
Either way, he was bound for the Allegheny County Jail.
(By the way, the jail is the impressive newer-looking building by the Monongahela River in downtown Pittsburgh. You can't miss it. It looks like an upscale Holiday Inn.)
But I digress; back to the steaks… Full Story
Today I want to tell you a story about the steak bandit. Just stay with me here. This is a story about energy – especially crude oil.
Last Saturday at the grocery store, a fellow shoved some steaks down his pants and made a dash for it. Aside from a possible commentary on the plight of some people in the current economy, the episode with the "steak bandit" brought back a memory, along with a broader implication for the energy sector.
WTI crude oil prices for September delivery were down $1 today (Tuesday) to $100.67 per barrel, while Brent crude dropped $0.17 to $107.39 per barrel, despite the fact that geopolitical tensions in the Middle East and Russia remain.
Oil prices hit two-week highs last week as tensions in the Ukraine and the Middle East intensified.
While WTI crude oil prices are down from their 52-week high $106.64 from June (as the Iraq crisis escalated) the humanitarian and political crises taking place throughout the Middle East and Russia will continue to have an impact on oil prices moving forward…