Weekend: High Supply

Written By Nick Hodge

Posted February 5, 2012

Everything we’ve been telling you continues to materialize.

There’s a North American oil and gas renaissance underway…

Foreign firms have invested more than $6 billion here since December, and the frenzy shows no signs of slowing down.

Just this week PetroChina (NYSE: PTR) paid over $1 billion for a 20% stake in Shell’s (NYSE: RDS) Canadian Groundbirch natural gas project. Located in British Columbia, Shell says the project can deliver 1 billion cubic feet of natural gas equivalents (bcfe) per day and will have a lifespan of 40 years.

Last November, CNOOC (NYSE: CEO) paid $2.04 billion to buy Opti Canada, giving China it’s second foothold in Canada’s oil sands.

In October, China Petroleum & Chemical, or Sinopec (NYSE: SNP), paid $2.2 billion for Daylight Energy’s assets.

High Supply

These abundant new finds of shale oil and gas have given temporary reprieve to the supply/demand picture.

OPEC is producing oil at a three-year high. It produced 30.7 million barrels per day (bpd) in December and 30.9 million bpd in January – both above the 30 million bpd target agreed upon at the cartel’s last meeting.

They aren’t the only ones increasing production…

The Energy Information Administration says total crude and liquid fuels production is expected to grow by 1.4 million bpd this year. OPEC will be responsible for 900,000 bpd of that growth, but the rest will come from the rest of the world, presumably from Canada and the U.S.

What’s more, demand is supposed to grow by only 1.3 million bpd this year, meaning we’re in for a short-term supply glut.

Same goes for natural gas, where plentiful shale supplies have forced prices down below $2.50 per thousand cubic feet (tcf) – the lowest prices in a decade.

This means investor gains are more likely to come from drillers and service companies than from the actual commodities themselves.

We’ve identified three companies you should be looking at if you want to profit from this boom.

And we’ve discussed plenty of other ways to play it as well, some of which you can find in the selection of this week’s coverage below.

Call it like you see it,

Nick Hodge
Editor, Energy and Capital

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The Keystone XL and the Northern Gateway: A Tale of Two Pipelines
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Burying Peak Oil: The Secret Behind Report 117
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Utica and Marcellus Shale Natural Gas: The Golden Road from Wheeling to Cove Point
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Chinese Record Gold Rush: China Buys Record Amounts of Gold
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