Oil Investing: You Have To Own This Industry…

| July 7, 2011 | 0 Comments

Well that didn’t take long…

After a quick drop to $91, oil’s trading back above $96 a barrel.  Maybe you don’t realize it, but this is where oil was trading before the International Energy Agency (IEA) dropped the SPR bombshell.

What am I talking about?

On June 22nd, the IEA decided to release 60 million barrels of oil from global Strategic Petroleum Reserves (SPRs).  The move is an attempt to ease oil prices and stimulate the global economy.

The idea probably looked great on paper…

Maybe they thought if they flooded global oil markets they could drive prices lower and keep them there.  Releasing two million barrels a day of extra oil capacity ought to keep prices low, right?


Markets have a funny way of defying logic… especially the oil market.  Here we are two weeks from the SPR news and oil’s already trading back above pre-SPR release levels.

Why are oil prices recovering so quickly?

It’s simple, the world is consuming huge quantities of oil.  According to the Medium–Term Oil and Gas Markets report from the IEA, the world is currently gobbling up around 88.1 million barrels of oil… per day.

Think that’s a lot?  Well listen to this…

The IEA is projecting global oil demand will break above 90 million barrels per day by the fourth quarter of 2011.  If that holds true, the world will be consuming oil at its fastest rate ever.

We have a very tight global oil market…

And the market knows the IEA can’t keep releasing from the SPR to keep prices down.  An OPEC production increase is the only way to keep oil prices contained in the long run.

That means OPEC’s top producer, Saudi Arabia, will have to bring forth a major production increase soon.  If they don’t, we’ll likely see oil prices shoot well over $100 in the very near future.

Wouldn’t it be nice to profit from rising oil prices?

Well, look no further than the Bakken shale…

Haven’t heard of it?

Well, the Bakken is an abundant oil and gas field in North Dakota and Montana.

In 2008, the US Geologic Survey (USGS) estimated there was up to 4.3 billion barrels of technically recoverable oil in the Bakken.  But as drilling technology advances, recoverable oil estimates for the field are growing… dramatically.

Industry experts now speculate the Bakken is capable of producing 24 billion barrels over its lifetime.

Clearly, oil companies with a strong foothold in the Bakken have access to some very valuable resources.

What companies have exposure to the Bakken?

Northern Oil and Gas (NOG), Continental Resources (CLR), and Oasis Petroleum (OAS) are just a few of the promising oil companies drilling in this prolific field.

All three of these companies have rising production rates and growing reserves… just what investors want to see.  And as oil prices rise, these companies will benefit as their profit margins expand.

In my opinion, US onshore oil producers are an essential part of every investor’s portfolio.

Instead of worrying about high oil prices, why not profit from the rise?  Investing in US onshore oil and gas companies is a great way to do it.

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Category: Commodities

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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