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Exploiting OPEC's Weakness

Keith Kohl

Written By Keith Kohl

Posted September 4, 2012

The vast majority of investors believe Saudi Arabia holds the world’s largest oil reserves. 

This is a common — and easy — mistake to make.

After all, the Saudi Kingdom boasts 264 billion barrels of oil reserves on paper (we’ll give them the benefit of the doubt this time).

Most people don’t realize it’s not the Saudis that claim the world’s largest oil reserves…

That distinction goes to Venezuela, with its approximately 296 billion barrels.

opec oil reserves 9-4

Considering 80% of the world’s oil supply is controlled by only a dozen countries, you’d think Venezuela has a bright future ahead…

That is, until you look closer at that supply.

Meet the Real Oil Crisis

For years, we’ve explained why tomorrow’s oil supply isn’t the same as the crude of decades past.

Most often we’ve focused our attention on the heavier grade that makes up the Saudis’ spare capacity — and the quality of those barrels still in the ground.

Today I’d like to talk a little about the Orinoco Belt…

This 600-kilometer strip of land is the sole reason Venezuela can claim the top spot on the world’s oil reserve list. The Orinoco Belt boasts an estimated 235 billion barrels of proven oil reserves.

However, 79% of their reserves are of extremely poor quality.

Unfortunately for Chavez, we’re not talking about the same light, sweet crude the Saudis are still producing.

The heavy oil being extracted from the Orinoco region has a low API gravity (under 200) and a very high sulfur content.

Also notice the country’s production peaked around 3.5 million barrels per day more than a decade ago:

ven prod

Of course, rising domestic consumption — now estimated at one million barrels per day — hasn’t helped Venezuela’s cause any.

Heavy Oil = Heavy Cost

Oil is oil, right? Well, not really.

What most people aren’t taking into account is the price tag that comes with refining the varying grades of crude…

When oil gets shipped to a refinery to be turned into the products we thirst for — gasoline, diesel, fuel oil, etc. — its quality will determine the level of refining it needs.

Heavy oil, for example, will always trade at a discount to grades such as WTI and Brent because it requires more processing.

It’s cheaper, yes, but much more expensive to refine.

And some refineries aren’t able to handle the poorer quality stuff.

Call to mind when Libya’s production was shut-in last year…

We quickly found out that many of the European refineries couldn’t handle the heavier spare capacity being produced by the Saudis.

This is also the reason Chavez is more dependent on us than we are on him.

The recent explosion at Venezuela’s Parajuana Refinery, the country’s largest oil refinery, showed us how weak their infrastructure truly is. The refining complex processes almost one million barrels daily and comprises nearly three-quarters of the nation’s entire refining capacity.

Chavez will have to rely increasingly on U.S. refiners located on the Gulf Coast.

And his country’s energy problems run even deeper: As it stands, Venezuela’s state-run oil company has to spend $3 billion each year just to maintain the country’s current output level.

You can probably imagine what will happen when they lose the U.S. as a customer — something that’s slowly becoming a reality…

ven imports

The latest uptick in U.S. domestic production is turning the tables.

Today we’re importing 300,000 less barrels from Venezuela than we were a year ago. In fact, imports from them haven’t been this low in 23 years.

That’s good news no matter how you slice it.

We’re no longer banking on the poor, sulfur-ridden crude from OPEC’s regrettable future supply…

Instead, we’re concentrating on stronger oil investments that can still bring light, sweet crude to U.S. markets.

You don’t want to sit on the sidelines of this good, old-fashioned oil boom.

My latest report will give you all the details on how to get your piece of the pie.

Until next time,

Keith Kohl Signature

Keith Kohl

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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 key advancements in robotics and AI technology.

Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.

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