Cheap Oil Is Living on Borrowed Time

Is the oil market living on borrowed time?

What on Earth would ever give us that impression? Perhaps it was a few months ago when we all watched WTI crude prices plummet into the $50/bbl range. For us, the market was rife with overly bearish sentiment over President Trump’s tariffs. 

But there’s something oddly comforting about cheap oil. Like the snooze button on a fire alarm — comforting for a moment, until the smoke starts rolling in. No, dear reader, cheap oil tends to lull you into thinking everything is peachy and the market is well-supplied; that you have more than you actually do. 

Wall Street, politicians, and headline-chasing pundits are all swaying to the same broken tune right now, one that insists oil prices are stable, plentiful, and dare we say, boring. 

But the thing about illusions is that they shatter. 

And this one is on a timer.

Right now, crude oil is pricing in a fantasy. 

Wall Street’s blissful ignorance is fueled by a perfect cocktail of manipulated narratives and wishful thinking. 

First, there’s the anonymous whispers into reporters’ ears from OPEC “sources” claiming production hikes are on the way. Then there’s the presidential bluster designed to sell the illusion of American energy dominance. And of course, you’ve got a mainstream media more than happy to stitch it all together into a tapestry of supply glut optimism. 

However, behind the curtain, the fundamentals are screaming.

Although the U.S. drilling rig count — which has been declining for years — is less of a barometer these days for future production thanks to the gains the E&P sector has made in drilling efficiencies, there’s only so far it can drop before those efficiency gains are threatened. 

The most recent decline in the Baker Hughes’ rig count is expected to continue through July; a pullback like this can’t be ignored forever. 

When you’re supposedly on the cusp of an oil oversupply, you don’t throttle back the tools used to get oil out of the ground — unless, of course, there’s no oil left worth chasing at today’s prices.

Remember that the only drilling area currently in breakeven territory is in Texas’ Permian Basin and Eagle Ford areas… and only just. That data is coming straight from the industry players themselves, which doesn’t mention the fact that our drillers are quickly running out of their best acreage; moving on to Tier 2 and Tier 3 acreage means higher costs, too. 

That brings us to a much darker side of this situation: America’s proven oil reserves are shrinking!

After unprecedented growth in oil and gas reserves, the EIA reported recently that the United States’ proved reserves of oil and gas are falling. 

It’s true. Our proved reserves of oil and condensate decreased by 3.9% year-over-year in 2023, and that’s despite production growth of 7.8% during the same period! 

Click to Enlarge Image

This isn’t just conventional crude that has been in perpetual decline for decades. North Dakota saw a 12.3% year-over-year drop in proved oil reserves in 2023. That’s a direct result of fewer rigs in the field. 

We’re not talking about a temporary blip, either — it’s flashing a warning light. Given that U.S. oil production is flatter than a West Texas plain right now, and expected to decline slightly over the short-term, get ready to see even more bad news going forward. 

The best output data we have from the EIA shows a slight decline in April’s oil production compared to the previous month. 

For an oil market supposedly on the verge of being “oversupplied,” that’s an awkward truth to ignore. But ignore it they all do, because it clashes with the prevailing narrative that more oil is always just around the corner.

As you know, the false oil narrative isn’t just being spread by the IEA, but also overhyped by our own President whenever he touts potential blockbuster oil drilling in areas like Alaska. We can’t blame him, but his Energy Secretary should know better.

To be fair, President Trump has a strong interest in keeping energy prices low, but his math won’t check out for long. 

The problem is that this perception game only works as long as the fundamentals stay politely offstage. And they’re not. One of the most overlooked pieces of this puzzle is the Strategic Petroleum Reserve — America’s emergency stockpile of crude that was drained to historic lows under the Biden administration. 

Anyone else recall when President Biden dumped over 180 million barrels into the market in 2022 to tame soaring prices brought on by the Russia-Ukraine war? 

But here’s the kicker: it was never fully refilled, which put the next administration in a precarious position when another supply crisis comes around — there’s no cushion to soften the blow anymore. Trump may talk a big game about energy independence, but he’s got less oil in the national pantry than any president in modern memory.

Today, oil markets are like a game of musical chairs played with molotov cocktails. As long as the music keeps playing — that is, as long as the narrative of oversupply holds — no one panics. 

But when the music stops, it won’t be a polite correction. It’ll be a mad dash for exposure to the very thing Wall Street currently treats as dead weight. And the same fund managers who’ve ignored oil for AI stocks and green energy darlings will come stampeding back the moment the headlines shift. 

And let’s talk about those OPEC rumors for a second. The July 6th meeting is being spun as a coming-out party for production increases. But even that’s a dangerous illusion. OPEC members have never been known for transparency or consistency. When anonymous sources say “output hike,” what they usually mean is “leverage play.” Floating the idea of more oil is a way to keep prices from overheating while production stays largely unchanged. And if they do raise output? It’s only because they believe demand is about to roar back stronger — not because they believe the market is oversupplied.

The disconnect between market sentiment and market reality has become so severe, it’s almost comical. Traders are pricing oil like we’ve got years of spare capacity and unlimited shale miracles. But the hard data — the kind you can’t bluff or spin — says we’re operating on fumes.

So here’s where the rubber meets the road: cheap oil is a mirage, kept alive by political rhetoric, media misdirection, and collective denial. That mirage is going to evaporate the moment real-world events catch up to the fiction. And when that happens, the price ceiling everyone’s gotten cozy under will vanish.

For us, this isn’t a warning. It’s a window.

If you understand what’s really happening — that the fundamentals are tightening, not loosening; that production is flatlining, not surging; that reserves are shrinking, not swelling — then you’re already ahead of 90% of the market. 

The only thing left is to act before the herd realizes they’ve been lied to.

Because the dam always breaks. 

When it does, oil certainly won’t be contained below $70 per barrel. And here’s the kicker — the smart money will already be there, soaking in the upside while everyone else is scrambling for a seat.

This is our first move.

P.S. AI giants have quietly used your personal data — from social media to Alexa — to fuel their billion-dollar empires. Now, thanks to Public Law 81-774, they’re being forced to pay up. You could claim up to $3,452 per month (and as high as $11,803), but you must act fast before the next payout on July 3.