It is incredible to me that people believe that oil is going away in our lifetimes.
No matter what the politicians say, I assure you… oil will remain the dominant fuel of our society. The world’s economy is built around oil… not the other way around. I’ve compared the goal of eliminating oil to trying to replace the human circulatory system with cat food. It’s just not possible.
Don’t believe me? Well, pay attention to the long-term oil outlook from the Energy Information Administration, the research arm of the U.S. Department of Energy. Their forecasts note that gasoline will remain the overwhelming form of transportation supply for at least the next four decades.
There is a lot of money to be made in the energy markets. And as we kick off this massive Energy Supercycle, there are plenty of opportunities to invest. Let’s dig into the upstream portion of the energy supply chain, and I’ll give you one name that you can buy today and sleep well at night.
Heading Upstream
The upstream energy market is my favorite place to trade. My preferred targets are in the exploration and drilling space.
Before drilling starts, companies must find oil that can be extracted. This requires companies to engage in geological surveys, seismic studies and exploratory drilling. Companies use advanced technology and data analysis to find potential oil fields.
After a company finds a field with oil, the drilling may commence. Companies drill both on land and offshore. Once a drill is completed, engineers extract the crude oil and bring it to the surface. During this period, engineers must maintain and optimize the well, ensuring that costs and production remain stable.
Oil production is a critical element of the global financial system. Oil is used in transportation, chemicals, heating and much more. And demand is VERY strong, as demographics support more demand for the future.
That said, while everyone is predicting that oil prices will rise above $100 a barrel, I’m a bit more conservative. I don’t really care if oil prices rise. I care if companies that drill for oil will find ways to extract and drill at lower costs. If production costs decline, then margins will be far more attractive for investors.
If you’re looking for a place to start — look no further than in the Permian Basin.
Production in the Permian
According to Rystad Energy, there are about 90 billion barrels of recoverable crude oil in the Permian Basin, a massive shale formation in West Texas and New Mexico. Production costs remain low, and Exxon Mobil Corp. (NYSE: XOM) is aiming to reduce its costs of output to $15 per barrel.
There are many different oil producers that investors can tap for future growth. The largest landholder in the region is Occidental Petroleum Corp. (NYSE: OXY), a producer based in Houston that’s backed by Warren Buffett.
In addition, players like Exxon and Chevron — both large multinational, integrated energy companies — have expanded their production reach in recent years. For anyone looking to tap into smaller names, there are regional players that will become takeover targets in the year ahead.
Deals have accelerated over the last year, with Permian Resources Corp. (NYSE: PR) buying Earthstone Energy and Exxon buying Pioneer Natural Resources. There are plenty of producers that will benefit from deal making and stable oil prices.
Of course, it’s important to pay very close attention to what executives are doing in the energy patch. Warren Buffett recently bought another $246 million in Occidental last week.
OXY remains my favorite energy stock to trade in this environment. If you’re curious about how you can tap into Buffett’s recent purchase and play the energy supercycle, check out my recent presentation. You’ll be happy you watched it.
Chat soon,
Garrett Baldwin
*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
You Can’t Afford to Miss This!
Did you catch the ProTrader Dashboard world premiere?
During the session, traders were blown away when Roger Scott revealed how easy it is to use the ProTrader Dashboard to track institutional buying and selling…
Not months or weeks after the fact… But as it happens… in real time!
Just look at some of the top signals we’ve nailed in the past few weeks using this proprietary software.
- 69% on NEE in 1 day.
- 75% on PENN in 2 days.
- 80% on TSLA in 1 day.
- 105% on SQ in 2 days.
- 114% on SO in 1 day.
- 220% on ORCL in 2 days.
- 426% on RTX in 2 days.
- 584% on DELL in 2 days.
Granted, some winners were bigger, some were smaller and there were even losers, too…
But this new software is truly a game changer!
So if you’re ready to discover what the all-new ProTrader Dashboard is all about…
*The profits and performance shown are not typical, we make no future earnings claims and you may lose money. The alerts expressed are trades Roger published in real time using the ProTrader Dashboard in his VIP room over the summer. There were bigger winners, there were smaller winners, and there were losers. Trade at your own risk.
Market Momentum is RED
Momentum is red, but we saw a sharp rebound Monday out of oversold, correction territory. Expect for the markets to stabilize a tad heading into the Fed meeting Wednesday. But there are still a lot of possible speed bumps in the week ahead.
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
