Investors are well aware of the shale oil revolution in the United States. But the "revolution" does not end here; it is spreading globally to countries as diverse as China and Poland.
There is one country in particular though that may experience circumstances similar to the United States, if not greater.
I'm talking about Australia, which has often been called "The Lucky Country." That description was first penned in 1964 by Donald Horne and he actually meant it negatively at the time.
But in recent decades, the term has been given a positive spin thanks to Australia's abundance of natural resources and its geographical location near the world's biggest consumer of commodities - China.
And Australia may have struck luck again thanks to the recent announcement of a massive shale oil discovery.
The Arckaringa Basin Could Be the Largest Shale Oil Find of All Time
Over the past few days, I have released information on what could be the largest shale oil find ever recorded.
It's located in an area of Australia called the Arckaringa Basin and contains as much as 233 billion barrels (or more) of recoverable shale oil.
That's more than all of the estimated oil in Iran, Iraq, Canada, or Venezuela. And it's just 30 billion barrels shy of the estimated reserves in all of Saudi Arabia.
The discovery at the Arckaringa basin is so big it's already prompting some observers to begin talking about energy independence for Australia, much in the same way Americans did after similar discoveries in the Bakken, Marcellus, Eagle Ford, and Utica basins.
And there is one small company that controls what is shaping up to be the biggest worldwide oil project to hit in decades.
How China and Saudi Arabia Mean You Should Bet on Higher Oil Prices
As Money Morning Global Energy Strategist Dr. Kent Moors pointed out not long ago, the sky is not falling on oil prices despite what the doomsayers believe.
There are two crucial countries that are behind the recent rise in oil prices: China and Saudi Arabia.
And if these two nations keep on their current path, it will mean one thing...
Even higher oil prices in 2013. Here's why.
After Nexen's Buyout, How Should You Play Canadian Oil Sands Stocks?
The purchase of Calgary-based energy company Nexen Inc. (NYSE: NXY) for $15.1 billion by China's CNOOC Ltd. (NYSE ADR: CEO) is the largest overseas purchase ever by the world's second-biggest economic power.
But it will likely be the last time China, or any other country, takes a big chunk out of Canada's oil sands - the world's third-largest proven reserves of crude oil.
That's because after Canadian Prime Minister Stephen Harper approved the Nexen deal in December, he banned further foreign firms' investment in Canada's oil sands and will allow them only under "exceptional" circumstances.
"The government's concern and discomfort for some time has been that very quickly, a series of large-scale controlling transactions by foreign state-owned companies could rapidly transform this [oil sands] industry from one that is essentially a free market to one that is effectively under control of a foreign government," Harper said in December.
"Foreign state control of oil sands development has reached the point at which further such foreign state control would not be of net benefit to Canada," he added.
But foreign government control isn't the real problem facing Canadian oil sands companies.
Two Reasons to Expect Greater Volatility in Oil Prices
A combination of rising demand and tension in the Middle East means oil prices will continue to climb.
How this plays out in the short term will have a primary impact on the profitability of oil sector investments. One conclusion is already clear. This will once again be a volatile market.
And this time, volatility will be point upward.
That is not to say that the rise will be continuous or without occasional pull backs. In fact, yesterday we witnessed two contrary signals attesting to an ongoing collision of forces.
Both of these are exogenous to market factors, a very important observation to recognize moving forward.
The direct relationship between supply and demand would oblige a rise in oil prices for the simple reason that more end use is moving back into focus.
Both the International Energy Agency (IEA) and OPEC have raised demands projections for the near term. Those levels are now approaching less than 3 million barrels per day of global supply.
Now we are not going to have a crude shortage anytime soon, although there may be some regional constrictions on the horizon. Ample supplies are available for quick pumping to meet rising demand. Nonetheless, there will be a greater use of unconventional production (tight, shale, heavy, oil sands).
And that means the oil coming on market will be more expensive.
Knee-jerk reactions to global events will again pull on demand sentiment. That, in turn, will spike the volatility. Yet this is likely to be more subdued on the down side than at any time in the last year.
Pundits have also introduced the specter of another (or "double dip") recession and fanning the flames of that fear would prompt the price of oil to move south.
The likelihood of a recession is rapidly dissipating and the prospects of these fear tactics are declining along with that reality. Reversals, therefore, while still inevitable, will be short in nature so long as the current underlying dynamics remain. Those are now pointing up.
I have a series of personal indicators used to determine what should be happening with oil prices. There are 10 of them, designed to estimate the actual composition, strength, and direction of pricing movements. For the past month, six of them have been pointing positive. As of Friday (these are calculated at the end of each week), seven are now moving north.
The upward pressure is building, reflecting the overall higher revisions in forecasted demand by IEA and OPEC. Yet we are once again reminded that the oil market hardly operates in a vacuum.
And that leads me back to those two outside signals we received yesterday.
Why Oil Prices Could Soar 40% by Summer
Oil prices have continued their upward move that began at the end of 2012, gaining over 8% in the past month.
Now, an oil analyst with Goldman Sachs Group Inc. (NYSE: GS) predicts Brent crude could soar much higher in the next few months.
Jeff Currie, GS's head of commodity research, said he wouldn't be surprised "if we woke up in summer and oil cost $150" per barrel.
That would be a 35% gain from Brent's recent price of $111.
Using the narrowing spread between the Brent price and that of West Texas Intermediate (WTI), at $95, Currie's forecast implies a 40% increase in WTI prices.
And there are many reasons oil could hit those highs by summer, or even sooner.
Will the New U.S. Shale Boom Kill Oil Prices?
These days everybody wants to extol the virtues of rising U.S. domestic crude oil production.
From decades of increasing reliance on foreign providers, some hardly sympathetic to American interests, the new prospect of having significant unconventional oil reserves here at home has been a major development.
The assumption advanced says that domestic sources will be cheaper. As a result, this should comprise a positive boon to consumers of oil products but a problem for producers and refiners. In short, the mantra among some commentators is to proclaim the end of the oil market as an attractive option for investors.
As with most such simplistic observations, however, it turns out not to be true.
A number of these "analysts" are actually talking down the prospects of oil prices because they have already shorted the commodity and will benefit their own investments if they can continue the downward push.
Well, oil prices are now going up, with both West Texas Intermediate (WTI) in New York and Brent in London at more than three-month highs.
In addition, the spread between WTI and Brent is narrowing.
The narrowing of that spread is occurring while both benchmarks are rising in price. The mantra of the pricing doomsayers would expect it to be going in the other direction.
There are two broad categories of reasons why matters are not happening as the doomsayers had expected (aside from the obvious - they misunderstood the dynamics from the beginning).
And once you understand both, you'll be in position to profit as prices continue to rise.
Play the Bakken Oil Boom Like Buffett
Many investors have heard of the Bakken oil field in North Dakota and Montana, but most are unaware of how important this formation is becoming to the U.S. economy.
More germane to investors is the fact that there is still a lot of money to be made from Bakken oil in the months and years ahead.
Just ask Warren Buffett.
He spotted the potential of Bakken oil well ahead of most and bought a non-energy company that would benefit greatly from the boom. Three years ago he bought Burlington Northern Santa Fe (BNSF) Railway Co. for $26 billion.
That railroad is now one of the main beneficiaries of the Bakken oil boom. (And people thought he just had always wanted to own a train set!)
"We're the 1,000-pound gorilla in the oil markets," BNSF CEO Matt Rose told Bloomberg News. "Crude by rail is going to be really strong for us. It's been a real benefit to us to replace some of that lost coal business."
The Bakken oil formation isn't just an investing opportunity; it's transforming the U.S. energy landscape.
How to Play the Resurgence in Oilfield Services
Whenever a recovery begins in crude oil prices and natural gas, it always begins upstream, usually very far upstream. As I have noted before, this is signaled in the oilfield services (OFS) segment of the energy sector.
My tracking index for OFS companies currently follows 63 providers of early field development and preparation. These include everything from initial geological surveys, through seismic, analysis, test and exploratory wells, to pad preparation, drilling, well completion, maintenance, support, and workover rigs.
Before the improvement is recorded by the operators - the firms actually producing the oil and gas - we should expect a spike to take place in OFS. These are the providers who will experience a push before anything is extractable. Normally, indications of a recovery occur in OFS first.
It appears the recovery is happening again this time. All 63 stocks on my tracking list are up for the week (by an average of 4.5%) and 60 are up for the month (with an average rise of over 14% for all 63).
As we go forward, there's one strategy you should use to play this recovery...
Where Oil Prices Are Headed In the Face of the Fiscal Cliff
You have heard all the stories of what will happen when the U.S. economy falls over the fiscal cliff.
As I write this, it appears that will happen--at least on paper.
Of course, it will take some time for the tax increases to kick in, while the automatic spending cuts may take a month or longer.
That may make it easier for some Members of Congress to act. Since the taxes will have technically increased, it will be easier for them to vote for an artificial tax cut.
I consider this the pinnacle of absurdity.
Subjecting most Americans to this charade-making them vulnerable to cuts in paychecks, dividends, and social security benefits merely to make some political brownie points-is the height of travesty.
But here we are.
Even if there is a this weekend or Monday, nobody will know what that means for several weeks. This will drag the drama on for a while longer as the precocious children inside the Beltway refuse to play on the same ball field.
Now we all know how this will end. There will be a stopgap measure rather quickly (probably around the time most receive that first paycheck of the New Year) to prolong the process into the first quarter - right into yet another showdown on increasing the debt ceiling.
Isn't there anybody else out there as sick of this as I am?
But in the end, we are interested in what the shenanigans mean for the energy sector.
Oddly enough, gas and oil prices have acted as if the cliff were an ant hill.
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