shale

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.