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How We've Been Profiting on Oil's Wild Moves

How We've Been Profiting on Oil's Wild Moves
Crude's whipsaw "roller-coaster ride" won't last forever

By Dr. Kent Moors, Global Energy Strategist, Money Morning

Government shutdowns, geopolitical angst, protracted instability inside the Beltway, and outright market manipulation are combining to make this a profoundly volatile, unsettling time.

On Wednesday, for instance, both West Texas Intermediate (WTI), the benchmark crude rate set in New York, and Brent, the more widely used oil trading standard set in London, spiked ferociously - more than for any one session in well over a decade. WTI ended trading up by 8.7%; Brent by 8%.

With these spikes coming after historic price declines, everyone in the media is now looking for the oil price "floor" that can enable steadier upward moves.

I don't expect that floor to be a factor until into 2019. Year-end tax sales, low holiday volume, and institutional portfolio adjustments mean any floor, if it shows up, probably won't register until January.

And yet, these kinds of violent swings can be remarkably profitable. Late last week, my Energy Inner Circle readers following along got the chance to close out a 1,000% profit on a Brent "straddle" - a call and a put expiring on the same date at different strike prices - that saw us play the "up" and the "down."

There are three things in play right now obscuring the "floor" and keeping crude prices untamable, but that will ultimately give way to a much smoother, upward price trend...

All's Fair in War and Oil

They say all's fair in love and war.

I say all's fair in war and oil.

When it comes to digging for "black gold," any stretch of land, water, or ice is fair game.

You can go from the deserts of Saudi Arabia to the dry dust of West Texas to the waters of the coastline to find this vital fuel...

Not to mention the cold desert of the Arctic.

It's long been known that the Arctic holds oil frozen under its icy top layer, and getting to it is quite the challenge.

More so, even, than extracting oil out of the waters of the ocean.

The Arctic region encompasses 19 geological basins – only half of which have been actually explored.

In 2008, the United States Geological Survey estimated that there are 90 billion barrels of undiscovered, recoverable oil in 25 identified areas in the Arctic – 13% of all the undiscovered oil in the world.

Now, despite the challenges of the region, many nations around the world are determined to take control of this land and its abundant natural resources.

Which leads to some increasing tension, adding to the existing conflict I've discussed many times.

The Arctic situation has remained fairly stagnant for the last several years, at least compared to other areas of oil exploration.

But a move by one of America's energy rivals has brought it back onto the map of world tensions...

The Shocking Role of Iranian Sanctions in Crude Oil's Plunge

The collapse in oil prices has now reached historic levels.

Tuesday's 7% plunge in West Texas Intermediate (WTI) - the largest slump in more than 30 years of futures contracts - marked the 12th consecutive daily loss for the New York benchmark. Before rebounding slightly yesterday, crude had been down more than 22% in less than a month.

Now, we've spoken many times before about the numerous reasons why crude prices can plunge: artificial manipulation from short sellers and institutional monkeyshines, geopolitical tensions, distortions in supply and demand, even outright oversupply - we've seen it all before. 

In this present case, some of this current decline is warranted, given the market's overestimation of Iranian sanction impacts and, to a far lesser extent, some weakening in underlying fundamentals.

But to be sure, the leading cause of the plunge has been a combination of what I have called the "lemming fixation" (a penchant for jumping off the cliff en masse) and some outright market manipulation.

I'll have more to say on this shortly, in a more extensive analysis my team and I are preparing right now.

But it's the completely counterintuitive - yet entirely predictable - effect of the recently re-imposed sanctions on the Islamic Republic that I want to explore today...

Double Your Money Now That the United States Is the World's Largest Oil Producer

oil stock

For the last 45 years, Russia and Saudi Arabia have dominated global oil production. However, U.S. production is roaring back - and rewriting the international balance in the process.

Last week, the U.S. Energy Department announced that the United State surpassed Russia and Saudi Arabia to become the world's largest oil producer for the first time since 1973.

America's stunning rise to the top of the production field has fostered the next catalyst to generate a triple-digit return for investors.

This Oil Pipeline Stock Could Jump 116% Thanks to Booming Production

After years of subpar performance, North American Oil Production is back.

According to a report published by the U.S. Energy Information Administration last week, U.S. oil production rose to 10.7 million barrels a day in June.

This is the latest jump in what has turned into a two-year rally for a beleaguered North American oil industry.

And it shows no signs of letting up - June's numbers put the U.S. on track to reach a record 11 million barrels a day before the end of the year.

One of My Favorite Drillers Is Set to "Strike It Rich" All Over Again

The Delaware Basin in arid western Texas and southern New Mexico used to be a good deal more inviting than it is today.

In fact, around 300 million years ago, when the region was south of the Equator, the area was a lush, tropical reef teeming with Permian life, covered by the warm Delaware Sea, which was part of the ancient Panthalassa Ocean.

Nowadays, the fossilized remains of that reef are exposed in the hot desert air, and the once-aquatic landscape has given way to scrub and the national parklands of Carlsbad Caverns and the Guadalupe Mountains.

The area is also known for its vast, thick deposits of limestone...

... and shale. Virtually endless expanses of oil-rich shale - wellspring of the second American energy revolution.

And one company is in the perfect position to reap the rewards of this ancient treasure...

This "Triple Play" Is Key to Profiting from Energy's Tense "New Normal"


Last Thursday, I filled my Oil & Energy Investor readers in on the best energy investing strategy to use in a world wracked by rising tensions on the Korean Peninsula, the Persian Gulf, and of course, Venezuela.

Now, energy is still making people fortunes. That hasn't changed, and it's not likely to in the future, either.

But in an increasingly anxious world, investors will see bigger, more consistent profits when they find a way to bridge two critical sectors: defense and energy.

In fact, in my monthly, paid Energy Advantage and weekly Energy Inner Circle investment research services, I'm adding significantly more "weight" in the stocks that do this very bridging.

Normally, I'd keep these plays close to the vest; after all, it's only fair. We've already enjoyed double-digit gains in these companies, and the upside potential is still enormous.

More importantly, the geopolitical situation is changing so quickly, and the impacts are so profound, that I want to make sure everyone is holding these three stocks at a minimum.

So here they are...