Oil

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What T. Boone Pickens Taught Me About Investing in Commodities

By , Special Contributor, Money Morning -

I’d first met Boone in part because I had mocked Peak Oil as yet another nonsense Malthusian fantasy.At a 2014 Stansberry Research Conference event in Dallas, T.Boone conceded that he’d been dead wrong about Peak Oil.

The most important lesson T. Boone taught me was that commodity industries – like oil and gas – that require huge capital investments are fraught with risk.

The Oil Sector Is Getting Ahead of Itself - Here's How to Profit

By , Quantitative Specialist, Money Morning -

It feels like 10 years ago, but it's really only been about seven weeks since that fateful April 20, when a COVID-19-driven collapse in demand pummeled West Texas Intermediate crude oil futures. Prices hit the floor, fell through it, and landed in negative territory at -$37.63 a barrel.

In those seven weeks, WTI has rocketed almost 200%. The S&P Oil & Gas Exploration and Production Select Industry Index has risen nearly 70%, though it's still down more than 24% for the year.

Over the past few days, though, oil benchmarks have been creeping 2% and 3% lower, which in my experience is a big, neon sign saying "Selling Ahead." And several marquee energy stocks like Occidental Petroleum Corp. and Halliburton Co. are also flashing sell-off warnings.

This reminds me of the old Road Runner and Wile E. Coyote Looney Tunes cartoons - remember them? One of the (many) cheesy running gags had Wile chasing Road Runner only to overshoot him at a cliff. Wile would hang there in midair for a second, have a "Maalox moment," and then drop.

That's not all that different than what's happening in crude right now. Both the commodity and most of its associated stocks entered what market technicians like me call "overbought" territory. Now they're dropping like rocks. Investors are starting to figure out if they're in over their heads.

How do I know? The answer is worth exploring because it can make you a sharper trader. There's one simple, small number you can look at in any stock chart that can tell you instantly how to play it.

I'll get into that briefly and then I'll tell you how to play the oil patch's precarious "Wile E. Coyote" situation... Full Story

What to Do After the Greatest Collapse in Any Commodity Ever

By , Technical Trading Specialist, Money Morning • @DRBarton_Stocks -

What happened to oil yesterday was the greatest collapse I've ever seen in any commodity, ever.

And barring some unforeseen apocalypse, we'll never see it again.

This just doesn't happen in the commodities market. Every once in a while in a stock, sure, you'll get a case of fraud or someone goes bankrupt. The stock will go to $0 over time.

In the commodities world, there's a bottom for prices. This doesn't happen. Until it did.

Oil futures traded at a negative price for the first time in history.

We had the perfect storm for an oil collapse.

Demand is down. No one is traveling, and global manufacturing has plummeted.

There's a price war. Saudi Arabia drove production way up, and Russia joined them. Now there's estimates of up to 30 million barrels a day of extra oil being produced. Even with a production cut, there will be 20 million barrels a day being produced with nowhere to go.

All that oil needs to be stored somewhere, and world is running out of places to put it.

Futures contracts are tied to physical delivery of a commodity. Everyone dumped them because they have nowhere to put that oil.

No one wants oil right now.

And that's why this oil story is so troubling - it's very much a demand story, not an oversupply story...

What to Do When No One Wants Oil

An oil trading firm in Singapore, Hin Leong, kicked off oil's trouble. Hin Leong buys and sells large super tankers filled with physical oil to distribute through Asia.

Sunday night, it told the world it had a non-disclosed $800 million loss from trading oil. To cover the loss, it had to liquidate oil futures - a fire sale. It had to sell...

Reality Gap of the Week

By , Technical Trading Specialist, Money Morning • @DRBarton_Stocks -

The OPEC oil cartel and other oil-producing countries, mainly Russia, spent most of last week hashing out a deal to cut oil production and put an end to oil's 60% price drop.

Under the so-called OPEC+ umbrella, the group finally agreed to a deal over the weekend.

Oil futures shot up, but fell back before trading Monday.

Oil opened up, but then fell.

That's because there's a huge Reality Gap between what the oil deal needed to do, and what it actually entails.

Here's D.R. with the details...

We're in Uncharted Territory for Oil

By , Global Energy Strategist, Oil & Energy Investor • @KentMoors_OEI -

The meeting in Vienna last week among OPEC members and their non-OPEC allies, OPEC plus, was intended to help nations reach an agreement on production cuts to extend past the current end date of April 1.

The concern is the spread of the coronavirus will drive down the price further as global economic demand slows. But Russia was not on board. And the Saudis' response to Russia's stance was to cut its price to Chinese customers, and plan to increase production by as much as 2 million barrels per day. That fallout then led to oil's massive 30% nosedive. And on Monday, oil's decline was literal fuel to the stock market fire, causing it to fall 7.79% in one day. Since Monday's losses, both oil and the stock market have recovered a bit. Oil is sitting at around $33 a barrel and stocks rallied at open.

But unless there's a resolution, we will be retesting the market lows that we experienced in 2015 and 2016, when oil dipped below $30 per barrel and we'll see a ripple effect through the economy that's going to have a parallel impact to the COVID-19 problems we already have. Here's Kent with the details...

Don't Miss This "Triple Play" Opportunity to Profit from Oil's Rebound

By , America's No. 1 Pattern Trader, Money Morning • @powerproftrades -

A lot of the novel coronavirus speculation has focused on what this outbreak panic will do to stocks. That's why we've covered the best actions to take now, like finding profits in rising pharma shares and getting into strong tech companies at great "buy-in" prices.

Of course, we'll continue to uncover profit opportunities in these areas. But more importantly, a huge cash cow has been revealed somewhere else...

Oil is down 24% in price in just the last month. But demand isn't going away. In fact, it'll increase this year. It is still the world's most important commodity, after all.

When you know how to seize this opportunity, the money can be yours for the taking.

I'm going to show you exactly how to do that today, with the three best ways you can play oil's rebound...

Turmoil in Middle East Makes This Reality Gap Trade in Oil Even Better

By , Technical Trading Specialist, Money Morning • @DRBarton_Stocks -

The reality gap I'd like to explore today is one which the U.S. oil market already had the set-up to be a huge money maker. And then it got better.

The U.S. airstrike which killed top Iranian general, Qassim Suleimani, sent oil prices spiking higher in the Thursday to Friday overnight market, greatly improving our entry for this reality gap trade. I'll explain this profit-making opportunity in more detail, but here's a quick take on this morning's market-moving news and what we can expect.

The financial markets are experiencing significant turmoil after the airstrike that I mentioned above. Defensive investments, or places where money flows in a flight to safety, have jumped higher. These include the Japanese Yen, the Swiss Franc, gold, and U.S. and German bonds.

That's a typical response when uncertainty hits the market - and a military strike like this definitely qualifies. But by the time I started writing this update to the column at 7:00 a.m. EST on Friday morning, the market reaction was already changing.

The market's fear gauge - the CBOE Volatility Index ($VIX) - which had spiked higher on the news, was already falling, as were Oil prices. And the major market indexes like the S&P 500 had already found their lows of the morning.

In short, the market's reaction to the airstrike is acting as a test of how much geopolitical risk matters in the markets right now. Said another way, there's a very good chance that the market just absorbs this news as a temporary blip. And that will be very good news for today's trade in a struggling U.S. shale oil producer...

The U.S. shale oil industry has revolutionized the crude oil market. And it was a major - if somewhat behind the scenes - driver of the recovery in the U.S. economy since 2009. Take a look at this production chart:

The impact of this shale oil boom on global oil economics has been immense.

But like the retail resurgence of 2019, the story of U.S. shale oil emergence is littered with haves and have nots. And as we'll see, right now it's easier to make money on one of the players that has struggled - and will continue to do so.

There's a reality gap in the shale oil world. The widely held belief is that the rising tide of crude oil production that we see in the chart above is lifting all ships. The reality is that some companies could be in big trouble because of the way they have raised money to finance their wells. And we can make money with that information that almost no one is telling you about it.

Some in the financial news media are even saying that U.S. oil companies are the best stocks to buy for 2020.

That prognostication is just people talking their book (touting the stocks they own in an effort to drive up the price) and it's dangerous to your wealth.

Now, I'm not saying that the shale industry is going under. Far from it. The "haves" will thrive, much as they did in the retail industry.

The reality gap is happening between what you're being told about U.S. fracking, and what's really happening on the ground...

More and more, small companies are about to go under. And you can make money while they do.

Here's what's happening...

The Top MLP of the Week Will Pay You a Nearly 7% Yield

By , Money Morning -

If you're a long-time Money Morning reader, you know it's no secret that we're big fans of MLPs.

That's why we're always on the lookout for the top MLPs to buy. MLPs are known for their excellent dividend payouts, reliability, and consistent distributions for income-seeking investors.

So, today, we've uncovered one MLP that not only pays 7%, but it also has great growth potential.

In fact, it could soar 110% over the next 12 months...

This Top MLP to Buy Pays a 6.8% Dividend Yield and Could Grow 117%

By , Associate Editor, Money Morning -

If you've been following us at Money Morning, you know it's no secret that we're huge

fans of MLPs. That's precisely why we're always looking for the top MLPs to buy. MLPs

are known for their excellent dividend payouts for income-seeking investors. So, today,

we've found one MLP that not only pays a great dividend yield of 6.8%, but it also has

some serious growth potential. In fact, it could explode 117% over the next 12 months...

Read more here...

How the Saudi Oil Attacks Will Impact Crude Prices

By , Director of Research, Money Morning -

Investors on Monday digested news of the massive drone attacks on Saudi Arabian oil infrastructure at Abqaiq and Khurais. Stocks took it pretty well, it has to be said; the Dow slid around 0.27% as an "oil shock" that would've sent indexes tumbling hundreds of points 10 or 20 years ago rippled through the broader markets.

Oil, on the other hand, is seeing virtually unprecedented volatility. Prices for crude have jumped by as much as $10 a barrel following the disruption of around half of Saudi Arabia's daily output. Prices then lurched lower yesterday when Saudi Energy Minister Prince Abdulaziz bin Salman suggested oil supply will be back online by the end of September.

As we'll see in a second, the ground reality is probably more complicated than that, and traders are still deeply conflicted about the big picture.

And in the chaos and conflict roiling the oil markets right now lies a once-in-a-generation opportunity for investors...

What Every Investor Needs to Know About the Saudi Arabian Oil Attacks

By , Global Energy Strategist, Oil & Energy Investor • @KentMoors_OEI -

I was still in the air with my wife, traveling between Dubai and our home in Florida, when some of the world's most important oil production and processing facilities in Saudi Arabia were attacked by drones.

By the time we landed, the massive Saudi Aramco processing facility at Abqaiq and the Khurais oil fields were burning, around 7% of global daily crude production was falling offline, and global crude prices were spiking by double digits.

At home, before I even had a chance to unpack, I participated in a marathon series of overseas conference calls which have only just ended.

With the attack, claimed by Houthi rebels out of Yemen, the long-simmering Saudi-Iranian proxy war has reached a new, volatile boil.

Frankly, White House rhetoric notwithstanding, Saudi Arabia's next steps will largely determine when and where outright war breaks out.

I can say with certainty, however, that U.S. and Saudi government responses to the global oil market have missed the mark.

Here's what's really happening...