Saudi Arabia Hits Full Panic Mode
Let the games begin... OPEC’s games, that is.
I laughed the moment I heard the Saudis had vowed to reduce their oil exports in August by almost a million barrels per day.
That was the outcome following the country’s latest meeting in St. Petersburg. The Saudi Kingdom now plans to cut exports next month by one million barrels per day.
Call me a pessimist if you want, but I’ll keep a healthy dose of “I need to see it to believe it” before I believe their decision is nothing more than lip service to give crude a quick boost.
But if that’s the case... it worked.
After all, West Texas Intermediate jumped back over $48 per barrel this morning.
Brent crude is trading at $50.56 per barrel as I type this.
But perhaps it’s just residual skepticism from the way the cartel has been acting for decades...
Let’s push aside the fact that several members suddenly doubled their reserves (and in Iraq’s case TWICE!) in the late 1980s.
Look, you and I both know that past quotas were a running joke.
Now that the group has dragged Russia into its output cut deal, Putin should be frothing at the mouth that OPEC is once again failing to deliver on its part of the deal. Ecuador’s recent announcement that it will not be sticking to its quota comes immediately to mind.
Perhaps the most interesting thing to come out of this meeting is the admission that OPEC might have had something to do with the oil price rout of the last few years.
Shocking, I know.
Up until this point, the House of Saud has laid the blame squarely on the shoulders of those U.S. drillers that have been tapping into the Lower 48’s vast tight oil resources.
Yet it was Saudi Arabia and its ilk that refused to reduce output back when U.S. shale was just getting off the ground.
U.S. Takes a Cautionary Approach
U.S. rig counts dropped again this week, signaling a slowdown in exploration and development of new wells.
I’ve said before how finding new supply is absolutely essential these days.
Companies are constantly on the lookout for new supply, especially with shale wells that have a much shorter lifespan than conventional wells.
Rig counts have dropped three times this year, meaning even as producers continue building infrastructure back up, some are exercising caution on the way.
But U.S. drillers fully understand that they can’t keep pumping without consequences.
Given the higher cost to develop the United States’ tight oil resources, you can bet those companies want higher prices.
And yet, there’s one country that may now have a leg up over everyone.
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Mexico’s Roaring Comeback
I know it isn’t easy to believe that Mexico is actually in a better position than both the U.S. and Saudi Arabia right now.
The death of its Cantarell field was the first sign. Yet, the collapse of one of the largest oil fields on the planet may have actually saved it from becoming too reliant on the commodity like Saudi Arabia.
The tide has turned.
All it took was an oil renaissance in an unlikely place...
And it’s all thanks to what analysts are calling Mexico’s “Bakken Moment.”
More important is the window of opportunity that is closing fast now that word of this oil boom spreads like wildfire.
You see, one analyst in particular, Christian DeHaemer, has uncovered a diamond in the rough in Mexico’s new oil era.
In fact, the moment he got back from his latest research junket, he and his readers wasted no time getting down to business.
But this is an investment opportunity you absolutely must see for yourself. You can watch Chris DeHaemer’s latest presentation on the situation directly here. Or, if you prefer, you can read the full transcript by simply clicking here.
The next step, as always, is up to you.
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.
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