Nearly five years ago, I told you that OPEC as we know it was dying.
Perhaps dying may be a bit hyperbolic, because the oil cartel still certainly wields a formidable amount of power and influence in today’s global oil markets.
Consider it an evolution… OPEC 2.0, if you will.
Ever since OPEC joined up with Russia and five other countries to form OPEC+, the crude coalition began coordinating their production to buoy oil prices and maintain market stability.
It was a necessary move considering that a flood of U.S. oil has made its way onto the global stage since 2015, when Congress lifted the ban on U.S. exports. If you’ve ever wondered what could give a young Saudi Prince nightmares, just take look below:
But it’s not the United States that they’re truly worried about.
Not really.
And here’s the dirty secret as to why…
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The Key to OPEC Superiority
Most people still think that the United States is OPEC’s biggest threat.
That isn’t true for two reasons.
First, I think it’s safe to say that our oil production growth last year exceeded most — if not all — expectations. It was a pleasant surprise considering the factors that weighed against it, the biggest of which being the decline in rig activity.
The problem now is future growth, and anyone who expects to see similar growth in 2024 is deluding themself.
The name of the game going forward is going to be all about spare capacity. Those who have the power to increase supply will have far more control of the market.
Considering that U.S. oil output is at record levels and OPEC+ is curtailing output by approximately 2.2 million barrels per day, the latter is holding all the cards this year on potential supply disruptions.
The second reason is even more impactful…
The Saudis had just as much to lose as us, and as our domestic production soared thanks to the tight oil boom since 2008, our reliance on Saudi crude plummeted to its lowest levels in nearly 40 years!
What our oil boom did was force OPEC to find new customers, which they’ve found among emerging markets like China and India. Despite the bearish sentiment over China’s economy throughout 2023, China imported a record volume of crude oil during the first half — roughly 11.4 million barrels per day, or 12% higher than the first half of 2022.
And with the exception of the United States, practically all of China’s oil comes from OPEC (Angola’s recent departure from OPEC now being the other exception):
That market share is now being threatened by an unlikely oil powerhouse.
Up until now, our biggest source of oil imports has come from one major global producer.
Today, Canada supplies us with four times more oil than all of OPEC!
Usually, this wouldn’t be much of a discussion since the United States has been the only real buyer of Canadian crude.
But that’s about to change, and it’s all thanks to the Trans Mountain pipeline expansion that is on the cusp of completion — just 5% left to go. This is the pipeline that links the massive oil sands operations in Alberta with the Pacific Ocean via British Columbia.
Once the expansion project is completed, an additional 600,000 barrels of Canadian crude will be available for export to Asia.
And it could very well make those overlooked Canadian producers a surprise winner in 2024.
Stay tuned for more updates on this.
Until next time, Keith Kohl A true insider in the technology and energy
markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new
technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the
Managing Editor of Energy & Capital, as well as the
investment director of Angel Publishing’s
Energy Investor and Technology and
Opportunity. For nearly two decades, Keith has been providing in-depth coverage of the hottest
investment trends before
they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution
currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on
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