This is Going to Surge Higher in 2018, and It's NOT Bitcoin
Today started off quiet, until I climbed into the backseat of an Uber.
Lately, it seems no matter who the driver is — young, old, male, female — the conversation inevitably steers toward one topic: Bitcoin.
Naturally, when it comes to digital currency, everyone’s an expert.
Now, there are only two times I really love a potential investment.
It's when either the market can’t stand it or the herd simply doesn’t know about it.
So when my Uber driver started laying out the basics of buying Bitcoin, you’ll have to forgive me for thinking of tulips.
However, there’s one thing all of this hype has done…
It’s masked one helluva run by oil.
A couple of weeks ago, I told you we’re staring at a generational bull market in oil; not only does the House of Saud need crude above $70 to keep its budget balanced, but it’s impossible to ignore the fact that the world’s oil companies have cut spending by nearly $1 trillion between 2015 and 2020.
Did you catch on to oil’s six-month run lately?
Well, here’s what we’ve been waiting for:
Don’t beat yourself up if you missed it, because this sucker is just getting started...
Crude Oil Realities
Look, we’re not wrong to get excited about the electric vehicle revolution seemingly taking place before our eyes.
I told my readers years ago that the world will eventually have to transition away from fossil fuels simply due to the fact that they’re non-renewable resources (for those of you yelling at your screens about abiotic oil, save your gripes for Twitter — I’ll be waiting with your tinfoil hat).
It makes sense, doesn’t it?
Plus, the number of electric vehicles on the road has doubled this year, and not a day goes by that we don’t read about a major automaker proposing grand plans for its upcoming EV fleet.
Volkswagen said it plans on selling up to 3 million electric cars annually by 2025. That may be a bold target, but VW would do anything at this point to get people to forget about its latest diesel scandals.
Nothing like a little, “Hey, what’s that?” to get the public sentiment back on their side.
Unfortunately, that kind of blind optimism is what will land the company in trouble unless it can overcome some serious obstacles ahead.
But I digress… we’re here for the oil today.
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In the last six months, Brent crude prices have jumped over 40%.
Yet it’s not the decision by OPEC and Russia to extend their cuts into 2018 that led to the most recent move this week.
I think it’s safe to say that most people have never heard of the Forties pipeline system.
It’s a 235-mile pipeline that hooks up more than 85 oil and natural gas fields in the North Sea to the United Kingdom’s mainland. Back in April, BP sold it to Ineos for approximately $250 million.
It transports nearly 600,000 barrels per day, which is roughly 40% of the North Sea’s oil production.
So, you can probably guess what would happen if it was shut down for a prolonged period of time.
Well, that’s precisely what happened.
But we’re not talking about it being shut down for a few hours or days. The Forties is expected to be down for several weeks.
This news is what pushed Brent prices to two-year highs.
Merry Christmas, oil investors.
And it’s only a matter of time before we see Brent hit $70 per barrel.
But there’s one huge catch in this situation.
You see, this is just the beginning for oil prices.
Assuming Russia and OPEC stick to their word and keep a lid on output, there’s just one place left that can make up this kind of supply: the United States.
Specifically, it’ll be the tight oil players in the Lower 48, which account for well over 60% of total U.S. production currently.
Now, in the past, these shale producers would simply turn on the taps and flood the world with oil, especially since the crude oil export ban was lifted last year.
But let me ask you this: What if they couldn’t? What if the last bear market took too much of a toll on the seemingly unstoppable shale boom?
It turns out U.S. shale may not be up for the task.
We’ll talk about this next week.
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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