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Crude oil prices have rallied 11% since OPEC agreed to slash oil output in November. And with prices heading even higher in 2017, people are looking for the best way to invest in oil. That's why we are going to show you how to cut through the noise and make oil investing profitable...
And those profits can be big this year. Money Morning Global Energy Strategist Dr. Kent Moors forecasts oil prices will balloon above $60 a barrel in 2017, as long as OPEC keeps its agreement together. That's another 25% jump.
Don't Miss: Read Moors' Bold 2017 Oil Price Prediction
By making the right oil investments you can see even bigger returns, too. We'll show you exactly how to invest in oil to beat that 25% gain in just a moment, but it's also important that you know which oil investments to avoid...
Why You Should Avoid Big Oil Company Stocks
Many people looking to invest in oil are drawn to the stocks of the seven oil supermajors, or Big Oil. But while Big Oil companies are global companies with the most famous brands in the industry, don't be fooled into thinking that means their stocks are good picks.
In fact, Big Oil stocks are down on the year, even as oil prices have rebounded and the Dow is up 4.23% on the year as its record-breaking run continues. Shares of Exxon Mobil Corp. (NYSE: XOM) are down 9.4% year to date, Chevron Corp (NYSE: CVX) is down 8.67% on the year, and ConocoPhillips (NYSE: COP) has fallen 1.58%.
That's because Big Oil companies are mired in expensive "megaprojects." These megaprojects cost billions of dollars, but aren't returning profits. BP Plc. (NYSE: BP) even announced to investors in February that they wouldn't turn a profit until oil hit $60 a barrel.
At the same time, Big Oil companies need to free up cash to protect their large dividend payments.
"They have maintained the same large dividends they had when oil prices were over $100 a barrel," reports The Wall Street Journal, "piling on debt and selling off assets to priorities shareholders above all else."
And that means the oil supermajors are late to a new American oil boom. Exxon and Chevron are selling off assets to free up capital to expand into this new gold mine of oil. But by making the right plays, you can book double-digit profits from "Permania"...
How to Invest in Oil in 2017
In November, the U.S. Geological Survey discovered a massive 20 billion barrels of recoverable oil in the Permian Basin. That $1 trillion find comes at the perfect time, because oil prices are rising and production costs are falling for American shale producers. And that means big-time profit potential for savvy oil investors.
The 20 billion-barrel oil discovery in the Permian Basin, which is an area that spans parts of Texas and New Mexico, makes it the biggest oil reserve in the United States. But one of the problems for shale oil has always been its costs. That's all changing now.
Shale oil sits in rock formations and is removed through a chemical process, which used to be quite expensive. Now, shale oil companies have found ways to produce the oil more efficiently, which makes this industry an excellent oil profit play this year.
Back in 2014, the price of oil needed to be above $85 a barrel for Permian Basin shale producers to make a profit. When oil prices crashed to below $30 a barrel in early 2016, many shale oil companies simply went out of business. Through technological advances and streamlining operations, that breakeven price has now dropped below $40 a barrel.
Trending: Natural Gas Prices in 2017 Will Soar Double Digits
The lower breakeven price coupled with OPEC's deal to boost oil prices is creating a financial windfall for these shale oil producers. And it's creating a new oil boom in the Permian Basin as companies flood the region to try and get a chunk of its 20 billion-barrel reserves.
This craze for Permian oil - "Permania" - even has Big Oil supermajors attempting to get into the game. After selling assets overseas, Exxon and Chevron have made a combined $10 billion in investments in the Permian Basin since last year.
The United States now has the most oil rigs in operation since 2015, and our domestic oil production has grown 4% already this year. More than half of that production is coming from shale oil. And profits are going to soar as oil prices rise and the Trump administration cuts regulations on the oil industry.
But while Big Oil scrambles to build up in the Permian, you can profit by owning the stock in the oil companies that have already figured out how to profit there. And they are going to see explosive gains this year as the boom grows. These are our best oil stocks to buy in 2017...
My husband and I are considering investing in oil and gas as a way to bolster our income, and we actually were considering going for the big name oil companies as a way to start out. However, you make good points in that those big corporations don't return much profit, and we definitely want a high ROI, so we'll take your advice and look into the smaller companies to begin our investing. Shale oil does sound like a lucrative place to look, as well, and we'll definitely keep an eye out for projects involving shale, as you suggest.