Weekend: Getting Back into the Oil Profits

Keith Kohl

Written By Keith Kohl

Posted October 30, 2010

Welcome to the Energy and Capital Weekend Edition – our insights from the week in investing and links to our most-read Energy and Capital and sister publication articles.

The supply-demand conundrum

For just a moment, try to put aside the upcoming elections and the fed’s fateful decisions.

Too many people tend to get lost in the ifs instead of focusing on the overall supply-demand issue.

Take this week, for example…

There wasn’t much to be up in arms about. Analysts were expecting a mild 1.5 million barrel increase in U.S. crude oil inventories.

Low and behold, the EIA dropped a bomb on those predictions after reporting a five million barrel increase in its weekly petroleum report.

In case you were wondering, U.S. crude oil inventory levels are higher than ever before – more than 26 million barrels higher than a year ago. Stockpiles of crude oil are well above the five-year average.

And yet crude oil prices are still hovering in that $70-$85/bbl range. In fact that’s been the case throughout 2010.

Here’s a look, straight from the Energy Information Administration’s weekly oil report:

crude oil price chart

But should that really surprise us?

On the one hand, our daily oil imports haven’t risen dramatically. If you look at the EIA’s data, we’re actually importing less oil than a year ago…

4 week avg oil imports

That’s a start, right?

One thing that has been rising is our domestic production.

Looking closer at the EIA’s weekly report data, you’ll find that our crude oil production reached 5.5 million barrels per day last week.

It’s almost unbelievable. After all, three of our largest oil-producing states — Texas, California and Alaska — have been unable to save their declining production.

For them, things get worse each year… And unfortunately, there isn’t much more they can do except watch their production spiral down the drain.

So why would you ever want to get back into the oil market?

It all depends on where you’re looking.

What recession?

Last June, North Dakota smashed another state production record, pumping out 314,000 barrels of oil per day from its fields.

My regular readers know for a fact that the Bakken formation should take most of the credit. This week, more than 152 drilling rigs were operating in North Dakota. I’ll give you one guess where those drillers are operating.

They’re not going to stop, either. North Dakota’s crude production is projected to top 500,000 barrels per day within the next several years.

What’s even more exciting is how the North Dakota’s Bakken is affecting nearby areas.

The Bakken fever is spreading, and everyone wants a piece this time around…

Next week, I’ll tell you about one of the places infected with the Bakken fever — including a few of my favorite plays.

Enjoy your weekend,

keith kohl

Keith Kohl
Energy and Capital

P.S. As always, below are the week’s top-read articles from Energy and Capital and Wealth Daily.

The Auto Industry’s Next Ten-Bagger: Detroit’s Dirty Little Secret
You would never have expected the kind of profits this small group of investors is making from the auto industry. And the secret to their gains lies in two of the rarest, most expensive metals on earth.

Profiting from Rare Earth Elements: Revealing the $273 Billion Chunk of Arctic Tundra
In the last place you thought possible, the rare earth rush is about to make investors a fortune. One tiny mining company controls 100% of the exploration rights to a 500-square-mile piece of Arctic wasteland… and their stock is about to skyrocket.

Why China is Begging the U.S. for Help: Igniting China’s Shale Boom
Editor Keith Kohl investigates China’s sudden interest in U.S. shale gas.

Solar Stock Blockbuster: This is the Only Solar Stock You Need to Own
Editor Jeff Siegel reveals his next solar blockbuster.

A Bird’s Eye View of Cleantech: Cleantech Investing from Soup to Nuts
Editor Nick Hodge gives a bird’s eye view of the cleantech sector before revealing how to profit from the details.

The Return of $100 Oil: How to Play the Coming QE2 Disaster
Editor Ian Cooper explains the probable damage of QE2 and offers ways to trade it.

Five Marijuana Stocks to Play Prop 19: Get High Profits from these 5 Cannabis Stocks
Editor Luke Burgess takes a look at the investment environment of California’s potentially new legal cannabis market, and gives investors five marijuana stocks that could soar if Proposition 19 is passed.

Secret Coal Boom: Profit From the Scourge of the West
Editor Christian DeHaemer explains how investors can make money in stocks by buying the one thing that everyone hates.

Why Rich People are Living in Tents: A Very Different Kind of Housing Crisis
Publisher Brian Hicks describes a very different kind of housing crisis unfolding in the U.S.

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