The Organization of Petroleum Exporting Countries (OPEC) met in Vienna this week.
The mood among the nations has been tense over the past year, to say the least.
A year ago, I told Growth Stock Wire readers that OPEC was playing a global game of oil-price “chicken”…
[ad#Google Adsense 336×280-IA]Back then, Saudi Arabia – OPEC’s largest member – convinced the other countries to open the spigots and produce as much oil as possible in an attempt to force out the expensive production that came online due to years of sustained high oil prices.
The plan worked better than anyone thought, sending oil prices down at the start of this year to their lowest point in more than a decade.
But as I’ll show you today, we’ve entered a new stage in the oil cycle…
Take a look at this 10-year chart of Brent crude oil (the global benchmark)…
As you can see, the price of Brent crude has rallied sharply from its low earlier this year. It’s up from $28 per barrel in January to nearly $50 per barrel today. That’s an astonishing 79% move higher in less than five months.
The low oil prices crippled high-cost producers… including some OPEC countries.
Not all of the 12 OPEC members (I don’t count Indonesia, which just reactivated its membership this year) increased production over the past two years. In the table below, you’ll notice that four countries are producing less oil today than they were two years ago…
Several of the countries on the list above are in deep financial trouble, including Venezuela, Libya, and Nigeria. These three, along with Iraq and Algeria, are part of OPEC’s “Fragile Five”… countries that need much higher prices in order to be able to profitably produce oil.
These major oil-producing countries had the freedom to produce as much oil as they wanted… but couldn’t afford to do it. That tells me that oil prices are past their bottom.
And more important, we’re seeing the worst oil companies go bankrupt at an astonishing rate – at least 77 since the start of 2015. That took a lot of the risk out of the market.
In the Stansberry Resource Report, we bought an oil explorer this month for the first time in nearly two years.
And there’s an even easier way for investors to profit from this uptrend.
You can simply buy one of several oil and gas exchange-traded funds (ETFs) available, like the SPDR S&P Oil & Gas Exploration & Production Fund (XOP), the iShares U.S. Oil & Gas Exploration & Production Fund (IEO), or the PowerShares Dynamic Energy Exploration & Production Fund (PXE).
These funds will let you participate in the rally in oil stocks. The stocks may not go straight up, but the bottom in oil is behind us… and the future is once again bright.
Good investing,
Matt Badiali
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Source: Growth Stock Wire