Lock, Stock, and Two Smoking Oil Barrels

One down, one to go. 

I don’t think the full realization of peace hit everyone until the bus carrying the remaining twenty hostages rumbled into Ramallah. In return, roughly 1,900 Palestinian prisoners were released, a couple hundred of whom were serving life sentences. 

What we witnessed may have been the first signs of a legitimate peace deal since the October 7th attacks took place. 

That peace deal, along with the sudden aggressive rhetoric between President Trump and China on a trade deal, was enough to send WTI crude prices spiraling lower by as much as 5%. 

For the record, we’re back below the $60 per barrel, and my words ring as true today as they did yesterday — oil is a screaming buy!

Oil is so cheap right now that the biggest peace deal to come out of the Middle East in a long, long time, couldn’t subdue prices for long. Perhaps it was the fact that the cold, bitter truth behind the conflict between Israel and Hamas never held any threat to global supply. 

But let’s face facts here… 

The Saudis were never in trouble, and all volatility swirling around Iran dissipated after Israel and the U.S. obliterated the country’s nuclear sites. If someone wanted to seriously disrupt Iran’s oil trade, they would’ve taken out the most critical oil facilities on Kharg Island, which handles over 90% of the country’s oil exports. 

Make no mistake, dear reader, that was the true danger from the conflict. 

But like I said, one down and one to go. If President Trump is able to put the war in Gaza in his rearview mirror, the next crisis to tackle is between Russia and Ukraine. Israel and Hamas may be splashed all over the front page of the news today, but the battles taking place in Ukraine and Russia hold the potential to reshape global supply.

Mark my words, the only thing that will bring Putin to the negotiating table will be striking Russian energy. 

Ukrainian drones and missiles have hammered Russian refineries, pipelines, and pumping stations. Over the past several months, Ukraine has launched dozens of strikes against Russian oil facilities, including recent attacks on refineries in Ufa and Crimea. 

Some reports have suggested that these assaults have knocked out more than 10% of Russia’s refining output, forcing the Kremlin to ban gasoline exports and restrict diesel shipments just to stabilize its domestic supply. 

That’s not a trivial problem, it’s long-lasting structural damage.

But always remember that geopolitics is simply the most visible surface of the oil story. 

The deeper threat — the one that Wall Street seems determined to ignore — lies in the illusion of global supply. 

Look, nobody doubts that demand growth is strong. Even the IEA, long the central voice of oil pessimism, is preparing to walk back its prediction that global demand will peak before 2030. The IEA will soon concede that the world will continue consuming more and more oil through 2050. 

The illusion today comes from the belief that supply growth is fine, that the world will somehow produce what it needs no matter the price. 

This fantasy has been sold so often that traders have started to believe it… lock, stock, and two smoking barrels. 

Want to peel back that illusory curtain? Well then, look no further than OPEC.

Ever hear the bears boast about the vast reserves among members, such as the 303 billion barrels beneath Venezuelan soil? Those reserves may be vast, but they’re utterly useless if you can’t extract them. 

Technically, Venezuela holds the world’s largest reserves. I would never dispute that claim. But buried down this rabbit hole is the fact that nearly all of those future barrels consist of heavy crude from the Orinoco Belt, which requires high-cost extraction and complex refining. 

At current prices, those barrels are effectively stranded. 

When Texas drillers with breakevens around $65/bbl are struggling, imagine the position of Venezuela’s state-run PDVSA, where breakevens can exceed $100/bbl. And that’s not even mentioning the decades of corruption, neglect, and mismanagement that plagues Venezuela’s state-run oil company. 

Even in the United States, where innovation and efficiency have carried the shale boom for more than a decade, reality will soon catch up. Tight oil producers have evolved over the last decade, maturing into disciplined operators, focusing on shareholder returns rather than reckless growth. 

But, discipline has a cost…

As the easy acreage depletes, breakevens rise. So as you may know, the Tier-1 acreage is quickly drying up, which means a lot of companies will have to spend even more to keep growing output. That’s a lot harder to do when oil prices dip below $60/bbl and new drilling slows, depletion accelerates, and future supply quietly tightens.

OPEC understands this better than anyone. The group is more than happy to pump just enough to keep the pressure on oil prices, and we can’t blame them for the strategy. Not only does it keep President Trump off their back by keeping oil prices low, it puts intense pressure on U.S. oil companies, almost daring them to keep boosting output.

It’s a dangerous game — short-term oversupply that conceals long-term scarcity. When the curtain eventually falls, the adjustment will be brutal. 

The market has mistaken today’s price weakness for stability, but what we’re really seeing is the calm before another supply storm — this is why I call oil a screaming buy!

Every structural force that matters — depletion, underinvestment, infrastructure decay, political fragility — points toward tightening supply in the years ahead. 

Oil is oversold right now, and that won’t last. 

More importantly, the market’s blindness is our opportunity. The smart money isn’t chasing the hype — it’s quietly buying efficiency. By that, I mean they’re finding the drillers that can survive the lean times; the companies who can pump more for less with access to world’s most prolific oil plays. 

They’re the ones building positions while everyone else mistakes a lull for the new normal. When prices rise — and they will — these are the operators that won’t just survive but thrive.

Cheap oil is not a gift; it’s a test. It's who can see through the illusion, who understands that the only way for the U.S. to maintain production records is for prices to rise, and who’s willing to position themselves before that happens. 

The market may see tranquility, but beneath it the world’s energy arteries are under attack, and infrastructure is aging (or crumbling under the weight of Ukrainian and Russian bombs). 

Today, you can almost hear the rumble of a new cycle starting. 

And those who are listening will already be in place when it roars back to life.

You just need to know where to look — and this is the best place to start.

P.S. The Fed Just Lit the Fuse on Silver (4 Stocks to Ignite)

Every major Fed rate-cut cycle has sent silver parabolic — 433% after 2008, 3,800% in the 1970s. Now, with the dollar plunging and demand from AI, EVs, and solar tech soaring, silver’s already up 58% this year… and four tiny miners could multiply that move into life-changing gains.