Burning The Midnight Oil
Great Ones, oil is weird.
I’m not talking about how oil is basically decayed, decomposed lizards from millions of years ago. Or how all those lizards died in a global extinction event … or even how the overuse of those recumbent and rotted reptiles is potentially leading us toward our own extinction-level event.
I’m talking about how there are literally billions of barrels of oil still in the ground, and the only limit to supply is how fast it’s being pumped out. I’m also talking about how there is a literal cartel that decides how much is pumped out each year.
Y’all have heard of OPEC, right? The Organization of Petroleum Exporting Countries?
There are 13 of them, with Saudi Arabia being the largest producer in the group. This group meets twice a year to discuss oil production quotas (and oil prices) for each of its members.
It’s a delicate balance because some members (like Saudi Arabia) — should they so choose — could literally flood the oil market and sink the others.
Basically, they all agree to produce enough to somewhat meet demand but maintain prices at a healthy level of income for member countries.
If this sounds like a soap opera, you’re not far off.
However, once you think you have a handle on how and why they raise or lower oil output limits, along comes OPEC+ … which, unfortunately, is nothing like Disney+ or any of the other “plusses” we hear about on a daily basis.
OPEC+ includes countries that are kinda like OPEC friends, but without benefits. The biggest OPEC+ member is Russia … and now we’re really into soap opera territory.
We’re talking Stefano DiMera from Days of Our Lives or Victor Cassadine from General Hospital. (Don’t judge. College was weird.)
We know about OPEC and OPEC+ … and soap operas? Come on, Mr. Great Stuff, get to the point!
Always impatient, aren’t we? Fine…
So, oil prices spiked above $100 per barrel last week due to the Russian invasion of Ukraine. Today, oil prices surged another 11% to more than $111 per barrel after OPEC+ decided to leave its current output plan in place. That’s oil’s highest level since 2011.
OPEC+’s inaction comes amid rising oil demand as countries and economies reopen and relax COVID-19 restrictions. The pandemic isn’t exactly over over, but you can see it from here.
But there are additional issues putting pressure on oil prices other than just rising demand, including shipping and labor issues due to lingering pandemic-related problems.
There are also inflationary issues that are driving up commodity prices around the globe, and that includes oil.
And then — the elephant in the room — Russia, one of the largest oil producers in the world, just started a war with Ukraine.
Economists and world leaders were hoping that OPEC+ would increase oil production output to offset the Russian war issue. The war with Ukraine has created such a stigma against Russia — and duly so — that many banks and traders are shunning Russian oil.
So, why won’t OPEC+ raise production to offset this growing issue? Well, partly because there are only two members of OPEC that have the capacity right now to increase production: Saudi Arabia and the UAE.
Saudi Arabia could literally, like, flip a switch and boost production by 1 million to 2 million barrels per day. But why would it?
If it did, it would make all other OPEC+ members really upset since they can’t increase that easily. A production increase could also piss off Russia, Saudi Arabia’s biggest business partner.
But the biggest issue, and the one that has the entire oil industry spooked right now is: What if Russia can’t increase production?
I’m not saying Russia doesn’t have the reserves or the capacity to increase production. I’m saying it might not have the labor force or the economic ability to increase production.
And if OPEC+ increases production, it could bring light to economic issues that Russia desperately wants to hide.
That is one hot mess, Mr. Great Stuff. So, what are investors to do? Buy oil?
Hmmm … it’s tempting to buy into the oil rally, and if you do, be sure you know where the exits are. Oil prices dipped around midday today after the EU and the U.S. announced they were releasing 60 million barrels of oil from strategic reserves. This is clearly a short-term fix, but it had the desired effect on the market.
The question you need to ask yourself before investing in oil at these prices is: How long will the Russian invasion go on, and will it have a lasting effect on the oil market? We’re already at 2011 levels, and the next peak could come near $127 per barrel, where oil traded just before the 2008 market crash.
There is some upside to be had here … some profits to be made. But they won’t come easy, so stock up on Mylanta if you’re brave enough to go this route.
But that’s just like, my opinion, man.
If you’d like another look at the oil market, check out today’s edition of Bauman Daily, written by Clint Lee: “Take My Oil. I’ll Pay You.”
Otherwise? Don’t be afraid to … you know … ditch oil like the rest of the alternative energy market. As in … building brave new batteries for a brave new world?
If you were to drive a Nissan Leaf from coast to coast, you’d have to recharge the battery eight times. A Chevy Bolt, seven times. Even the Tesla Model X would need to be charged six times.
But with this new battery technology in your vehicle, you’d only have to recharge once … in a matter of minutes.
Not to mention, this stunning new technology is about to cut the cost of electric vehicle (EV) batteries in half … meaning by next year, an EV is expected to cost the same as a gas-powered car.
And boy howdy, did Wall Street have some shade to throw Dollar Tree’s (Nasdaq: DLTR) way this morning. Shares of the discount retailer roiled on disappointing revenue and a weaker-than-expected sales outlook.
The thorn in Dollar Tree’s trunk? Higher costs won’t leaf the poor company alone — and the inflationary seeds it sowed earlier in the year by raising prices on most products by $0.25 ain’t cutting it against this kinda inflation.
Fear took root in the hearts of many a Dollar Tree investor after hearing its ho-hum earnings hype, with DLTR stock sinking like a moss-covered stone before making back some of its earlier losses.
Looking for a sure bet? One stock market wager you can safely make is that Wall Street isn’t done wetting its whistle on gambling stocks — if Morgan Stanley’s bullish call on DraftKings (Nasdaq: DKNG) is any indication.
The investment bank went so far as to call DraftKings its top pick for the U.S. sports betting/iGaming sector, saying: “We expect [this market] to be very large, with few market share winners, including DKNG.”
Now, DraftKings hasn’t been drafted into the stock market hall of fame … yet. In fact, it’s down almost 20% year-to-date. But with the sports bettor’s strong ties to both the NFL and the UFC undercutting some of the competition, it may be worth cashing in some of your chips for a few DKNG shares.
Editor’s Note: This Simple $50 Move Could Mint Fortunes
If you can spare just $50 today … then you could take advantage of a very unusual opportunity to join forces with some of America’s best-connected billionaires.
Many of today’s moneymakers are staking millions of dollars on a radical new advance that Inc. magazine called “the most important technology of the decade.”
It has nothing to do with cryptocurrencies … 5G … blockchain … or green energy. Yet it could hold the key to a $30 trillion market windfall.
Nordstrom (NYSE: JWN) — aka, the “other Macy’s” — is up big today after reporting rock-solid earnings in the face of rising inflation.
Notably, Nordstrom earned $1.23 per share in the last three months compared to $1.02 expected, on revenue of $4.49 billion.
Part of Nordstrom’s newfound success comes from improvements in its off-price business, Nordstrom Rack. It turns out having clothes in stock that you can actually sell leads to … well, sales.
In the coming months, Nordstrom says it hopes to sell more clothes as businesses open back up and people return to office life. Just don’t tell that to Zoom Video Communications (Nasdaq: ZM) investors…
Why did Ford (NYSE: F) give these EVs free will? Don’t these investors know the EV market has enough to go around?
Leaning hard into the Tool kick this week, I see. Why is Ford spiraling out now?
Why, it’s splitting right in two! Business segments, mind you. To further signal that it’s “totes serious” about making EVs now, Ford will have one division devoted to legacy gas-powered cars and one division solely committed to EVs and EV accessories. You know … software?
Better still, Ford lifted its predictions for its EV production, now expecting half of its sales will be electric by 2030 — up from a 40% prediction last May. Sounds great on paper, doesn’t it?
Don’t forget that this is Ford we’re talking about — the Pinto probably sounded great on paper too. (On second thought … nah.)
Welcome to poll day, Great Ones! This time ‘round the polling booth, we’re asking you to predict the future once more.
Oh boy, I’m prophesizing already!
It’s BYOCB, though — bring your own crystal ball. So get ready to share your thoughts on this week’s hot topic: oil!
Oh … boy.
I know, it’s been literally ages since we last asked you for your oil opinions … way back in the hazy days of *checks notes* July 2021. Call me crude, but methinks it’s oil time once again.
If you didn’t completely scroll past today’s issue, you know that oil prices are rising faster than Great Stuff’s gif game — which you can check online anytime — by the way.
Many of y’all might be turning to alternative energy as a … well … alternative. So, let’s find out just how many of you are ditching dinos and going green!
Click below and let me know:
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If you’re looking around for last week’s poll results on hydrogen-powered trades, it’s high time we get into them!
We asked all y’all hydrogen players for your hydrogen plays, and here’s how it played out: A whole 44.9% of you said Plug Power is your main Plug, while 32.7% of you are into Hyzon’s Hyzon-Hyzoff hoopla.
8.2% said you’re in some hipstery hydrogen stock that the rest of us are just too pedestrian to know about, while another 8.2% said “No hydrogen for me, tanks, I’m full.”
And finally, a shout-out to the knights who say “NEE!” Thank you for repping NextEra Energy out there. All 6% of you…
Then again, maybe you’re more like Great One Mike B. who’s double-dipping in the hydrogen market:
Oh … this lil’ soundbite here? That’s a thing we call “Reader Feedback.” And you can take ‘er out for a spin yourself anytime you please.
If you’re reading, you might as well be feedbackin’. So get to yappin’ in our inbox!
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Until next time, stay Great!
Editor, Great Stuff