The Trump Embargo!
Do you know Tobey Gus?
Everyone knows an investor like Tobey.
He may not have a Wall Street level of investment acumen at his disposal, but he knows enough to invest for his family’s financial future.
But Tobey has one fatal flaw when it comes to investing...
Whether or not he realizes it, he’s an emotional investor. One day his long-term confidence is unwavering; the next day his assuredness falters and crumbles under the weight of a single headline in the media.
You see, Tobey is a part of the investment herd.
As a whole, you can spot this group by the lack of individual thinking and behavior similar to the rest of the herd.
If you don’t know Tobey, you certainly know these investors. They pile into a rally with no rational explanation and sell without a thought.
Make no mistake, it’s all too easy to get swept up in their stampede.
Today, the email he sent me was more frantic than ever.
This time he had come across a headline predicting that a sudden and inexplicable crash in oil prices would occur.
Naturally, his first response was to head for the exits along with the herd.
They couldn’t be more wrong.
I can’t blame Tobey and his friends for getting worried.
Analysts at Bank of America Merrill Lynch just reported that oil prices could plummet up to $30 per barrel if China starts buying up Iranian oil.
As it stands now, China is Iran’s biggest customer. Over the last two months, the Middle Kingdom has accounted for about half of Iran’s crude exports.
The latest volatility is all thanks to the most recent trade spat with the U.S. Analysts are concerned that China will start buying Iranian oil hand over fist as a reaction to Trump imposing a 10% tariff on approximately $300 billion worth of Chinese products.
Never mind the fact that Bank of America Merrill Lynch reiterated that its forecast for Brent crude next year was still $60 per barrel.
Or that global demand grew at a strong pace in 2018.
BP’s Statistical Review of World Energy 2019, which was released back on June 11, showed that global oil consumption jumped to 99.8 million barrels per day in 2018, representing a 1.5% year-over-year increase.
That’s more than most expected.
It also doesn’t account for other bullish factors now in play.
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Every time I focus my attention on Venezuela, I always tell myself that things can’t get much worse for the beleaguered country.
In fact, I told you back in March that there was nothing President Trump could do to exacerbate the crisis that has taken grip of Venezuela’s oil industry.
I was wrong.
Yesterday, Trump put the nails in the coffin of Venezuela’s crisis by imposing a total economic embargo on Maduro’s government.
We haven’t seen this kind of action on this side of the world in more than three decades.
The move effectively freezes all government assets and bans all transactions with the country. That goes for any company or individual that wants to do business with Venezuela.
If you didn’t believe that Venezuela’s oil production was heading for zero before, this should change your mind.
That embargo will hit one major oil-importing country the most: India.
I know our attention these days tends to focus on China more than other nations, but India happens to be the world’s third-largest oil importer, buying over $114 billion worth of crude in 2018.
Sadly, India has been a little too hungry for Venezuelan crude recently. In May, India’s imports from PDVSA were more than double compared to last year’s levels.
Thanks to Trump’s sanctions on Iran’s oil exports, India was forced to find a new source of crude.
Now they’re going to have to search elsewhere.
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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