Low Oil Prices Will Gut U.S. Domestic Production
Shale boom is about to go bust if oil prices don’t rise soon. For now, producers can sell at below cost or even at a loss, but this is unsustainable. An oil price below $75 will bankrupt many U.S. producers and put a complete halt to new exploration and investments.
States like North Dakota, Wyoming, Alaska, Oklahoma and New Mexico could quickly slip into recession if the oil price doesn’t turn. Wyoming alone has 6% of its entire workforce directly involved in oil, however that number is much larger and difficult to calculate since oil boom towns create activity in local hotels, restaurants, housing and logistical jobs that service the area.
A Master Commodity
Oil is the master commodity, of course, and this too shall pass, which is why we are urging our subscribers to be prepared to buy low! Conventional producers are still profitable, even sub-$50, so as the price of these stocks crash along with the fracking companies, we want to be at the ready to buy some of the highest quality names in the oil sector.
With dividend yields north of 5% and plenty of cash in the bank, they are ready to maximize profits when the oil price inevitably rises. Something that may take a few years, but when it does, we see this as a once in a decade opportunity. Low prices will lead to lower supply, however demand is rising.
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China alone in the past 12 months has increased their demand by 300,000 barrels a day!
That’s about 33% of the current global surplus.
Oil Wars Vol. 1: Geopolitics of the Oil Crash to $50