In addition to the increased demand we talked about in January, violence in the Middle East and North Africa (MENA) has driven oil prices into the stratosphere. The price of light, sweet crude climbed above $112 a barrel last week, up more than 22% from where it started the year.
A recent pullback has driven prices back down to about $107 a barrel, but don't be fooled. Strong demand in emerging markets, a weak dollar, political turmoil in the MENA region, and a strong speculative sentiment will continue to push oil prices higher.
However, supply disruptions and civil unrest in the Middle East-North Africa (MENA) region in recent months have had the biggest impact on oil prices. Egypt, Libya and Yemen have all played a part in driving up oil prices, and now they're about to be joined by another volatile oil producer.
I'm talking about Nigeria.
Here are just a few reasons why:
- Suncor offers diverse and reliable production at a time when civil unrest in the Middle East has increased uncertainty in the energy market.
- It's leveraged to higher oil prices.
- It's transparent
- And it's reducing its debt.
However, it was the president's comments regarding natural gas that had the biggest impact on energy markets.
The natural gas contract for May delivery gained 9 cents, more than 2%, to $4.356 per 1,000 cubic feet on the New York Mercantile Exchange following Obama's speech Wednesday.
The Libyan rebels now control oil fields producing between 100,000 and 130,000 barrels a day, and they say that will quickly increase to 300,000, with exports renewing in a week. That higher figure would account for about 19% of daily exports from Libya before the unrest started.
To the extent that anti-Gadhafi forces can secure the oil fields presently under their control, at least some of those exports should begin to flow again.
The bottom line: It's time to sell United Continental Holdings Inc. (Nasdaq: UAL) - before it breaks down to new levels of weakness (**).
We are right now looking at the prospect of significant and sustained instability in a region that's home to two-thirds of the world's known crude oil reserves.
The Middle East crisis - and the unsettling reality it represents - has already sent tremors through the international energy sector. Oil prices are on the march. And this is merely the beginning.
The problems will likely get much worse.
But forewarned is forearmed: Even if the Middle East crisis continues to escalate, we can predict how the global energy sector will be affected. In fact, if the crisis reaches the severity that I'm expecting, it will send the world's energy sector through three very predictable phases.
And each of those phases affords investors with very specific profit opportunities - if they know what to expect.
For the three phases to watch for, please read on...
The political mayhem in Egypt is the latest oil-price catalyst to appear, and is yet another candidate to help push 2011 oil prices closer to the predicted $150-a-barrel level. Analysts worry that Egypt's chaos could disrupt the millions of barrels of oil that pass through the Suez Canal.
Traders' main unease is that the political unrest in Egypt is something that could occur in neighboring countries - especially those with a much bigger influence on the global oil exporting market.
However, one company that is worth watching is Brigham Exploration Co. (Nasdaq: BEXP).
Brigham is an oil & gas exploration company that's focused on the Bakken Formation in the Montana and North Dakota area of the United States. The company operates on an area of about 200,000 acres and says it could have as many as 1,600 drilling locations on its Bakken property. I would be shocked if it ended up drilling 25% of those locations, but it is always nice to know that there is a solid inventory of prospects waiting in the wings.
Brigham has turned the Bakken into one of the largest on shore fields in America, and the oil that's now being produced there is increasingly valuable. However, equally valuable is the proprietary knowledge Brigham has derived from the project.
The GOP traditionally has been the party that supports the development of fossil fuels, while Democrats tend to push for more environmental regulation and a move toward renewable resources.
Right now, oil industry lobbyists believe higher prices warrant more drilling off the U.S. coast, but environmental groups, congressional Democrats, the Obama administration - which relaxed drilling restrictions just months before BP PLC's (NYSE ADR: BP) disastrous spill - aren't likely to agree.
In fact, lawmakers are already sniping at one another, spurred by the findings of U.S. President Obama's oil spill commission, which was tasked with investigating the Gulf oil spill.
But that 13% advance is just the beginning.
Crude oil prices are poised to again break the psychologically important $100 a barrel mark in a bid to move higher throughout 2011 and 2012, and some forecasters are calling for prices to zoom by as much as 65% from here.
If that happens, crude oil would approach - or possibly even eclipse - the all-time high of $147 a barrel, a price not seen since the summertime speculative frenzy of 2008.
Not so when the government is Beijing, and Washington politicians halfway around the world are busy looking for votes.
This tiff could be filed away as just another tempest in a teapot... if it were not for the other important projects it could derail along the way. Those projects just happen to have a major impact for American natural gas technology and the companies likely to benefit from its foreign introduction.
If the two countries can get it together, it could mean profitable new opportunities for both.
To find out how the energy sector would benefit from U.S.-China cooperation, read on...
Speaking in advance of tomorrow's OPEC meeting in Vienna, Saudi Oil Minister Ali al-Naimi said that prices between $70 and $80 a barrel are "ideal," and noted that the market is "very well-balanced" right now. In a related development, Sanford C. Bernstein & Co. LLC slashed its oil-price forecasts for both next year and 2012, and attributed the new viewpoint to big stockpiles.
But this only provides you with part of the picture. And it'll lead you to the wrong conclusions.
So here's the proverbial "rest of the story" - including everything you need to know about tomorrow's OPEC meeting.
CNOOC initially will pay $1.08 billion for a 33% stake in Chesapeake's Eagle Ford shale acreage in Southern Texas. China's third-largest oil company will invest an additional $1.08 billion by paying 75% of Chesapeake's drilling and completion costs in coming years, allowing Chesapeake to tap hard-to-extract shale gas deposits and boosting its weak balance sheet.
The deal highlights China's need to develop its shale-gas extraction techniques. The country has 26 trillion cubic meters of shale gas reserves that are largely unexplored due to a lack of drilling ability - and Chesapeake is a pioneer in the shale gas industry.