By Sasha Cekerevac for Investment Contrarians | Dec 11, 2013
In 1938, Mexico nationalized its oil industry, taking over all aspects from production to final distribution. This ban on ownership by foreign companies continues today; however, changes are underway.
Under the leadership of Mexico’s new president, there is a growing desire and need for the knowledge and technical skills developed by foreign companies, many of which are U.S.-based, to stem the decline in oil production and revive the industry in that country.
I think this will be a tremendous investment opportunity for oil stocks going forward. Mexico still has a tremendous amount of energy commodities under the ground, but many need advanced technology to extract them. And U.S.-based oil stocks are among the leaders in the world when it comes to extraction technology.
By allowing foreign-based companies to help develop projects, oil stocks would profit from having access to new reserves, and Mexico would benefit from having billions of dollars in funding and access to those with top-notch technical skills.
There are several different types of oil stocks that would benefit from this investment opportunity. One company that I’ve liked for some time is Halliburton Company (NYSE/HAL), a global leader in the oilfield service industry.
While Mexico has not yet changed its legislation and we don’t know which companies will obtain these oil rights at this time, Halliburton has been extensively offering its services in Mexico for a number of years. I think it’s highly likely that Halliburton would benefit from more work as this investment opportunity opens up.
When investing in oil stocks, one has to consider the company’s current level of production, future reserves, and potential for growth … Read More
There’s happiness at the gas pumps. The price of gasoline has been on the decline with the average price in the U.S. down to $3.29 per gallon as of October 28, a year-over-year decrease of $0.27 per gallon. In fact, we could see even lower gas prices on the horizon as oil prices fall.
In this new energy environment in America, the country is becoming more self-efficient in producing oil from its ground thanks to the growing adaptation of fracking technology in North Dakota and Montana to squeeze oil out of the rocks in the ground.
The explosion of oil production from the Bakken region in North Dakota has been superlative and has everyone, including myself, thinking there will be a time when the country will not have to buy oil from the Organization of the Petroleum Exporting Countries (OPEC). In my view, it’s just a matter of time.
And if you add in the rise in oil from the Canadian tar sands, the move to independence in oil demand will become even more realistic. According to IHS, the amount of oil being moved via rail cars could rise to about 700,000 barrels a day by the end of 2015. (Source: Domm, P., “Canadian oil rides south even without Keystone pipeline,” CNBC, November 4, 2013.) The hotly debated Keystone XL pipeline, if it’s ever built, could move 830,000 barrels of oil per day from Canada.
Clearly, the numbers are there, and unless a crisis in the Middle East surfaces, we could see oil prices continue to decline as domestic and Canadian oil flow rises.
The days of high oil prices … Read More
We may be headed for an opportunity driven by chaos. These are the times when money can be made.
The stock market is on full alert with the news that the United States may mount a military intervention against the controlling government in Syria on speculation of it using chemical weapons on civilians.
We have already seen a flow of capital into the precious metals, such as gold and silver, which are both trading at multi-month highs, and oil, which would be affected by a conflict in Syria.
As evidence of the U.S. military entering into the conflict mounts, we will see nervousness surface and traders dumping equities, moving into gold and cash instead.
But rather than wait for an escalation of the Syrian conflict, you should begin to look at the different ways of making some quick profits if further tensions materialize.
The most obvious strategy is to buy gold, as it’s still regarded as a safe haven during periods of crisis and chaos. The precious metal moved higher after the U.S. launched its military into Iraq in 2003, as seen in the chart of gold prices below. In fact, the U.S.-Iraq conflict helped to drive the massive decade-long bull market in gold. So, if the U.S. does get involved in Syria, then consider looking to accumulate gold futures or gold exchange-traded funds (ETFs).
Chart courtesy of www.StockCharts.com
Of course, in the event of an attack, I would expect selling to intensify in the stock market. In this case, an interesting ETF that plays an upward move in gold and downward move in the S&P 500 is the FactorShares … Read More
Oil prices continue to edge higher on the chart, and that’s pushing the cost of gasoline higher at the pumps.
Now, while U.S. crude inventories have risen over the past two weeks, I do not believe there’s a supply-demand issue that is propping it up. I believe the demand for oil has more to do with the summer driving season and other unusual factors, not a sustained upward move in oil prices.
I also believe that oil traders are reacting more to headlines than the underlying fundamentals of the market. For example, a strong initial claim reading last Thursday drove up optimism that the economy is improving, but the real truth is the economy is stalling.
Remember the first-quarter gross domestic product (GDP) reading of 1.8%? That’s hardly indicative of an economy that is sizzling. That’s also why the Federal Reserve is not cutting its stimulus and why record-low interest rates are here to stay for at least another year. The economy is stalling and could worsen—and that doesn’t support higher oil prices.
Corporate America is not exactly reporting strong revenue growth. Did you see the numbers from heavyweights Intel Corporation (NASDAQ/INTC), eBay Inc. (NASDAQ/EBAY), and International Business Machines Corporation (NYSE/IBM)? The lack of revenue growth from these major technology companies means demand is lower and suggests the economy remains fragile.
The reality is that $100.00-a-barrel oil is just not realistic. I believe oil prices will retrench back to below $100.00 once the speculators who are driving up oil prices dump their positions and take their profits.
But what really stinks in all of this is the impact on gas … Read More
When oil prices recently fell to below $80.00, I said don’t sell.
The U.S. Energy Department increased its projections for crude oil prices for this year, adding that global oil consumption will rise to a record high in 2013. (Source: “U.S. Energy Department Raises 2013 Oil Forecast,” Bloomberg, January 8, 2012.)
Take a look at the price chart for the December West Texas Intermediate (WTI) futures contract. After trading at $115.00 in May 2011, we have seen oil prices slide, despite multiple attempts at rallying back to the $100.00 level. The spot WTI is trying to hold at its 50-day moving average (MA), currently above its 200-day MA of $85.08.
Yet the chart is displaying what looks like a bullish flag formation setting up, which means that higher oil prices could be coming, rising above $100.00 in the best-case scenario, based on my technical analysis. You need to be watchful of the $80.00 support level, which was breached on several occasions, but in each case, there was a rally after.
Chart courtesy of www.StockCharts.com
I believe oil will continue to hold above at least $80.00 a barrel going forward and will rally as the global economy strengthens. If you extend the oil futures contract to 2021, the current prices range from $83.00 to $96.00, so I’m not that worried and don’t have the urge to go and sell.
Helping to add support will be the continued erosion in the major economies in the eurozone, along with its impact on the U.S. and China.
Also add in the geopolitical issues in the Middle East. Iran and North Korea are real threats … Read More