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Two Ways to Cash in on Energy Security

by Dr. Kent Moors | published January 16th, 2014

Today, I want to talk about to you about a new investment opportunity.

It’s in energy security, and I have two money-making ways for you to play this trend.

It stems from the accelerating need to protect the production, transport, and distribution of our newfound wealth in oil and gas.

This point was hammered home yesterday with the release of Oil Security 2025: U.S. National Security Policy in an Era of Domestic Oil Abundance.

The 108-page report is the inaugural effort of the Commission on Energy and Geopolitics. Admiral Dennis Blair, former Director of National Intelligence and Commander in Chief, U.S. Pacific Command; and General Michael W. Hagee, 33rd Commandant of the U.S. Marine Corps, served as co-chairs.

Not surprisingly, the report reflects matters I have discussed before.

They include: the rise of security issues surrounding new domestic oil finds, increasing geopolitical tensions and the changes in the energy balance, both from a supply and a demand perspective.

In this case, the transition of supply from conventional to unconventional sources, combined with a new emphasis on domestic U.S. production, certainly has both global and security considerations.

But it’s the changes on the demand side that are even more striking…

Part Two: How to Profit as the Energy Balance Shifts

by Dr. Kent Moors | published January 9th, 2014

On Tuesday, I told you how “energy rebalancing” is going to hand us some profitable new opportunities this year.

In Part One, I introduced you to three different dimensions of this unstoppable trend, but I focused only on the big changes happening in the energy network.

Several of the examples I used were global in nature and provide a great segue into the final two dimensions of energy rebalancing: The changing geographic considerations and financial arrangements.

Of course, “geographic considerations” refers to location.

And the three I mentioned on Tuesday – the Russian ESPO pipeline, European imports of liquefied natural gas (LNG), and China’s rapidly expanding presence in the South American energy picture – are perfect examples of the evolving geographic picture.

Yet, the geographic also introduces two other main elements.

That includes a dramatic shift in the balancing point in global energy markets, which means that where the demand is will drive the energy markets.

In this case, demand has moved significantly from North America and Western Europe to the developing world in general… and Asia in particular.

This trend will become even more pronounced in 2014…

What 18 Oil Executives Just Told Me in Las Vegas

by Dr. Kent Moors | published November 19th, 2013

As you read this, Marina and I are once again on a flight home from Las Vegas.

It was our sixth trip to “The Strip” since May. It seems everybody wants to meet there these days. It is also the first stage in what is going to be a very hectic travel schedule.

We arrive back in Pittsburgh late tonight. Then I fly solo to Baltimore tomorrow to work on very significant new product launch at Money Map Press (you’re going to hear a great deal about this one soon…so stay tuned.)

Afterwards, there won’t be much time to wind down. The two of us are off to Rio de Janeiro on Thursday, back on Thanksgiving and then on to Moscow the next day.

Of course, I will be bringing you along on all of these trips – including my December adventures which I’ll be discussing in due course.

For now, let’s just say it’s shaping up to be a blur of airports over the next two months.

As I noted about a month ago, there are some big things happening in the global energy mix right now and they are going to provide us with some great investment opportunities.

But first, I need to talk to some very important but scattered people.

That brings me to the 18 oil executives I just met with in Vegas…

The Misunderstood Link Between Oil, Natural Gas and Inflation

by Dr. Kent Moors | published June 27th, 2013

According to conventional wisdom, there can’t be a significant rise in inflation without a corresponding, and usually preceding, jump in energy prices.

In fact, the correlation between energy prices and inflation has become almost a mantra among some market pundits.

Unfortunately, the reality is somewhat different than what’s portrayed by talking heads in thirty- second sound bites.

As with most complicated problems, the answer just isn’t that simple.  

While the energy sector stretches from hydrocarbons, through alternatives, to the renewed interest in solar, wind, geothermal and biofuels, it is the dominant force in the sector that tends to drive the markets.

That means crude oil and natural gas.

Oil, Natural Gas and Inflation

At first, the inflation argument seems plausible enough.

There would appear to be little opportunity for an across-the-board stimulation of the inflation fires without there also being a corresponding surge in energy prices. Energy is the single most pervasive underpinning of economic activity.

In fact, post-facto analysis of the 2008 run up in both natural gas and oil prices does provide some credence to the idea that rising energy costs did serve as a precursor to inflation.

However, there is a caveat. It’s one frequently confronted in all types of analysis…

Two Oil & Gas Game Changers… This Morning

by Dr. Kent Moors | published January 23rd, 2012

Two major events rocked the oil and gas sector this morning.

But they weren’t tied to ubiquitous market volatility or natural disasters.

These were intentional – each a result of human decisions.

Whatever the cause, the result is that we are we are off to the races… and you and I have the opportunity to benefit nicely.

The Embargo Has Begun

First, the European Union (EU) in Brussels passed its anticipated oil embargo against Iran.

The EU also froze assets of the Iranian central bank in Europe. I have recently commented on what this action would mean to the oil markets, even if Tehran does not make good on its threat to close the strategic Strait of Hormuz.

Closing the strait, even for a short time, would lead to the quickest rise in oil prices on record.

But the likelihood of that taking place is uncertain. Iran, after all, gains 80% of its income from oil exports. They would experience a steep financial cut by their own hand.

More certain now are the major crude oil pricing issues that would result from withholding Iranian crude from the European market.

And that one will be happening.

The Underlying European Oil Contagion

by Dr. Kent Moors | published August 19th, 2011

As we await another down day on Wall Street, attention once again turns to weakness on European banks as the culprit.

Actually, that seems to be only half the situation.

Crude oil in New York is poised to move down again this morning, following upon an almost 6% drop yesterday. Brent in London, however, dropped only half that and, despite the bank problems and the ever-present continental debt worries, is going back up again today.

At close yesterday, the spread between the Brent benchmark crude price and WTI (West Texas Intermediate, the benchmark used in NYMEX trading) stood at over 29% of the WTI price.

Remember, as I have mentioned here many times before, WTI is a better grade of oil than Brent. That should mean, if normal market conditions actually dictated trade, WTI prices would be at a premium to Brent. And they were consistently… until last year at this time. For the past twelve months, the reverse has been the case.

Brent Prices Reverse Course

Now, I have also noted before some of the reasons for this, with the primary cause being the fact that Brent is now used as the standard for discounting more actual crude physically traded worldwide than WTI. The vast majority of daily global transactions are in oil having more sulfur content than either of the primary benchmarks. Neither Brent nor WTI, therefore, really represents the world’s stock of crude.

However, of late my curiosity has been poking around elsewhere. How can the effective pricing of Brent remain at such levels, given the fiscal malaise that is Europe?

My initial take on this was presented to the Greek Finance Ministry in late June, during an eventful stay in Athens marked by high humidity and higher tempers in the streets. My preliminary analysis had concluded that as much as 28% of the Greek debt problem had effectively been discounted and transferred into Brent oil futures.

After I gave my briefing, the ministry released a truncated press release holding the rest of Europe responsible for a quarter of the country’s debt mess! That was hardly my intention, but it did give me some reason to consider this further.

Later events have simply reinforced the following observation: The European price for oil is supported by its debt problem.

We have spent so much time treating European debt in isolation – regarding it as a sovereign fiscal problem or a result of undercapitalized banks – that the analysts as a whole have been missing something important.

As the concern over European debt contagion increases, the oil contagion is taking place almost unnoticed.

Oil Trading Moves Off The Market

It happens this way:

Crude oil is a financial asset as well as a commodity. That means the contract has a collateral (and a fungible, for that matter) application. It can be exchanged, leveraged or used to buy and sell other assets. Anything that has this flexibility and has an underlying market value to boot has a larger market presence than simply the contract itself.

Now any financial asset has this utility. Some, such as agricultural commodities (which have a striking parallel to oil contracts in market dynamics), are so well known for doing this that their trade is heavily regulated on exchanges.

There are also the matters of ease of transfer and ready liquidity to purchase. I may have considerable asset value in my house, for example, but it is released only if I can sell it. That is a big unknown in the current market. So what do I do? If I need the cash, I will take out a home equity line of credit.

And that gets us back to the European oil situation.

Click here to continue reading…

Oil Slides as the Debt Crisis Looms

by Dr. Kent Moors | published July 25th, 2011

Brace yourselves; this is shaping up to be a very rocky week.

Inside the Beltway, the children we call our “leaders” continue to hold their breath and throw temper tantrums in opposite corners.

While the gridlock continues, Asian and European markets are already sending clear signals that the combination of party games in Washington and continuing debt problems on the Continent is eroding asset value and confidence – and fast.

We are beginning to run out of time.

Click here to continue reading…

The New Oil Index is About to Create Even More Opportunity for Investors

by Dr. Kent Moors | published January 12th, 2010

Speculators in New York won’t be calling the shots anymore. Not in oil, anyway.

The way we price it. The places we trade it. The companies that stand to profit most.

It’s all about to change.

This was confirmed at a meeting I just attended in The City, London’s financial district. I arrived from Moscow’s Domodedovo Airport for an unusual Saturday morning gathering of bankers, traders and analysts called only days before.

The subject? A new oil-pricing index.

This is huge.

More oil-project funding is raised within a three-mile radius of The City’s Liverpool Street train station than anywhere else on Earth. And now they’re preparing to control the oil trade, as well.

This will create all kinds of new ways to make money in oil. Not just with fancy financial instruments designed for the “big boys,” but with retail investments, too. So there’s money in this for you.

For more on the future of crude-oil investing …

Four New "Profit Routes" Emerge in Oil

by Dr. Kent Moors | published December 18th, 2009

MOSCOW – Sergei Kudryashov likes pizza, poker and American jazz. He’s also deputy head of the Russian Ministry of Energy (Minenergo) and former VP at NK Rosneft OAO (LSE: ROSN), the No. 1 state-controlled oil producer.

I’ve known Sergei for almost two decades now. We compare notes whenever I’m in Moscow. This time, I briefed his team on key developments in the international oil markets. And, as usual, I came away from the meetings with some incredibly valuable information – information the public simply can’t get on its own.

So let me share what I’ve just learned. It’s a tremendous opportunity to profit from Russian oil – without investing a dime in the country itself. Indeed, as you’ll see in a minute, there are several ways to make money right here at home.

First, here’s what’s going on.

Why Russia’s Oil Fields Will Soon Be Crawling with Westerners

by Dr. Kent Moors | published December 11th, 2009

Western oil majors are about to help Moscow solve its energy problem. And that could be a boon for investors.

The traditional Russian oil fields in Western Siberia are well past peak production. Some satellite fields in the region remain, but the extraction gains will be marginal.

My sources in Russia’s Ministry of Natural Resources and Ecology (MNRE), the government entity responsible for distribution and oversight of development leases, now acknowledge that the country’s overall crude oil production could decline by more than 7% over the next several years.