Here’s a Free Tip: Crude Oil Stocks

Crude oil industry

People ask me all the time what stock they should buy.

My answer: The one that looks the best.

I know that sounds like an odd reply. But if you want to make real money in the stock market, you need to strive to buy companies offering a promising future. And you’ll usually find these in the most exciting sectors.

With that in mind, here’s my free tip: Trade with the trend. It makes life so much easier.

Looking at crude oil, I haven’t been a fan for years. In fact, on many levels, I’m still not a fan. But after months of trading above US$50 per barrel, oil prices have started to surge higher. That’s something we must respect. And that’s why I’ve tipped three crude oil stocks in my advisory service, Resource Speculator.

Mind you, that’s for a good reason, as crude prices could keep surging, even if it’s only in the short term.

Crude oil’s story

OPEC is still manipulating the oil market. It’s planning on extending its production cuts next year. Remember, it capped oil output at 32.5 million per day in November. That’s got the market excited.

MarketWatch explained yesterday:

“Oil prices have been going higher in recent weeks due, first and foremost, to evidence that OPEC and Russia’s efforts to reduce the global supply glut was showing positive results, and that the group was somewhat surprisingly sticking to their agreement,” said Fawad Razaqzada, technical analyst at Forex.com.

“Talks that the production cuts could be extended has been providing further confidence to oil investors that the rally could be sustained,” he said.

Over the past few weeks, a number of signatories to the deal have indicated a willingness to hold back production potentially through 2018.’

There are rumours that both OPEC and non-OPEC members will extend the production freeze into late 2018. They are on track to cut about 2% of the global oil supply into March. On Friday, OPEC and Russia boasted record compliance to their agreement. The producers reached a conformity level of 116% in August, compared to 94% in July.

Robbie Fraser, commodity analyst at Schneider Electric, told MarketWatch yesterday that the release ‘suggested internal optimism for the effectiveness’ of the output cuts.

I agree.

Punters are starting to take OPEC more seriously. The committee’s next meeting is set for 29 November. That’s one day before OPEC meets. In other words, there’s plenty of time for speculation to grow about another production freeze.

Market sentiment has turned very positive on crude.

Hurricane Harvey destroyed stockpiles during the seasonally-high-demand months. Plus, the number of active US oil rigs has dropped three weeks in a row. And don’t forget about rising global tensions.

Are you paying attention?

ABC News reported yesterday:

Turkish President Tayyip Erdogan has threatened to cut off the pipeline that carries oil from northern Iraq to the outside world, intensifying pressure on the Kurdish autonomous region over its independence referendum.

Voting began on Monday despite strong opposition from Iraq’s central government and neighbouring Turkey and Iran — both with significant Kurdish populations — as well as Western warnings the move could aggravate Middle East instability.

Mr Erdogan, grappling with a long-standing Kurdish insurgency in Turkey’s south-east, which borders northern Iraq, said the “separatist” referendum was unacceptable and added economic, trade and security counter-measures would be taken.

He stopped short of saying Turkey had decided to close off the oil flow.

Indeed, in a world in which markets are driven by rumours, a threat is enough to drive crude prices higher.

Take a look at the weekly chart below:


Source: Tradingview.com; Resource Speculator
[Click to enlarge]

Brent crude’s major resistance is shown by the bottom blue horizontal line. Brent has broken out above the line for the first time in two years. A weekly closing above US$58.49 per barrel should put crude in a bullish posture.

Now, here’s the catch…

Brent crude’s target stands at US$69.60 per barrel — the 2015 high. For crude to break out, I believe Erdogan needs to actually turn off the pipeline that carries oil from northern Iraq to the outside world. If that happens, the best crude oil stocks are in line to potentially skyrocket. For more details, go here.

Regards,

Jason Stevenson,
Editor, Resource Speculator

Jason Stevenson

Jason Stevenson

Analyst at Markets & Money

Jason Stevenson is Markets and Money’s resource analyst. He shares over a decade’s worth of investing and trading experience across resource stocks and commodity futures and options.

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