🛢️ Recovering Demand Is NOT Enough

Oil demand is returning and OPEC continues to make production cuts, but oil prices are still suffering.‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ 

SPONSORED Another 1970s-Style Oil Crisis? We bought Saudi Arabian oil, and it priced its oil in U.S. dollars. Now that relationship could end. Editor's Note: The oil price war is in full swing. Prices have recovered from the negative territory they were in last month. But they're still down 50% since January. And further destruction is sure to come (as David mentions below)... Luckily, there are three bulletproof investments you can take shelter in now to hedge against this downturn. Click here to find out more. - Kaitlyn Hopkins, Assistant Managing Editor ENERGY INVESTING Oil Demand Is Returning, but Prices Are Still Too Low David Fessler | Energy and Infrastructure Strategist | The Oxford Club For the last several months, world oil markets have taken it on the chin. There's been too much production and unprecedented coronavirus-led demand destruction. Global storage capacity is also nearly full. But the hurt is just getting started... Price Update In the exploration and production (E&P) space, cash flow is king. If an E&P company isn't pumping and selling crude oil, it doesn't have cash coming in. And if that's the case, it doesn't have any choice but to close its doors. And that's exactly what an increasing number of E&P companies are doing. When oil briefly traded below $0 per barrel a few weeks ago, a number of big E&P operators like Whiting Petroleum Corp. (NYSE: WLL) threw in the towel. Prices have since recovered and are now trading north of $20 per barrel. But for E&P companies, that price is still a nightmare. No E&P company in the U.S. can turn a profit selling oil at these prices. You can't "make it up on volume," as the old saying goes. The bankruptcies we've seen so far are likely just the tip of the iceberg. According to Rystad Energy, if oil continues to trade around $20 per barrel, as many as 533 U.S. E&P companies could go bankrupt by the end of next year. And if oil starts trading in the teens, the number of bankruptcies could double. Essentially, any E&P company that has debt (and most E&P companies do) would be at risk. As I write this, WTI and Brent crudes are trading at $25.51 and $29.92 per barrel, respectively. Prices are holding firm at the moment. That's because Saudi Arabia has agreed to cut an additional 1 million barrels per day (bpd) starting in June. At this point, June production from the oil kingdom looks like it will be 7.5 million bpd. After the Saudis announced the additional cut, oil prices barely budged. Brent's price initially increased 1%, but it quickly gave up those gains. Prices are still down by more than 50% since January. Even Saudi Arabia is facing tremendous financial pressure. It's been actively campaigning to other members of OPEC+ to follow its lead and make additional voluntary production cuts. So far, the United Arab Emirates and Kuwait have agreed to additional cuts of 100,000 and 80,000 bpd, respectively. SPONSORED Attn: Baby Boomers: "This Should Scare the Hell Outta You..." On November 3, 2020, for the first time in our nation's 244-year history, the biggest voting bloc in America... 73 MILLION millennials (the most left-leaning generation in our HISTORY)... will decide the presidential election. And that should SCARE the hell out of you. Here's why...   False Hope All of these cuts should eventually bolster prices, right? Wrong. The cuts are nowhere near enough. The demand destruction that occurred several months ago was nearly double the supply cuts. We are starting to see some minimal demand resume as some countries gingerly begin returning to normal life. Italy, South Korea, Singapore and a number of U.S. states have lifted stay-at-home orders. People are out and about again. And they're buying gas for their cars. But that may be another false hope. In those countries and in many U.S. states, the coronavirus is returning and rearing its ugly head. This will create demand destruction all over again. In the U.S., demand is just over half of what it was before all this started... The overall problem in the oil patch remains one of overproduction. U.S. producers are still producing too much oil. If they don't pump, they don't generate cash and they risk bankruptcy. If they do pump, they exacerbate an already difficult situation. They are damned if they do and damned if they don't. It's a good reason for investors to steer clear. Good investing, Dave Leave a Comment MORE FROM PROFIT TRENDS Big Tech Stampedes Higher This Earnings Season To Be a Successful Investor, Go Against the Crowd Why Quantitative Trading Is Better for the Small Investor Facebook Twitter Email Share SPONSORED 7% Dividend Stock Ticker Giveaway! (Yours 100% Free!) The award-winning author of Get Rich with Dividends is giving away - for FREE! - the ticker symbol to a massive 7% dividend payer today. CLICK HERE or watch the video presentation above to get it NOW - completely FREE. (PLUS: You'll get details on five more stocks to play today... one alone could hand you up to 500% gains!) You are receiving this email because you subscribed to Profit Trends. Profit Trends is published by The Oxford Club. Questions? Check out our FAQs. Trying to reach us? Contact us here. Please do not reply to this email as it goes to an unmonitored inbox. Privacy Policy | Whitelist Profit Trends | Unsubscribe © 2020 The Oxford Club, LLC All Rights Reserved The Oxford Club | 105 West Monument Street | Baltimore, MD 21201 North America: 1.800.589.3430 | International: +1.443.353.4334 | Fax: 1.410.329.1923 Oxfordclub.com The Oxford Club is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that although our track record is highly rated by an independent analysis and has been legally reviewed, investment markets have inherent risks and there can be no guarantee of future profits. The stated returns may also include option trades. We expressly forbid our writers from having a financial interest in their own securities recommendations to readers. All of our employees and agents must wait 24 hours after online publication or 72 hours after the mailing of printed-only publications prior to following an initial recommendation. Any investments recommended by The Oxford Club should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Protected by copyright laws of the United States and international treaties. The information found on this website may only be used pursuant to the membership or subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of The Oxford Club, 105 W. Monument Street, Baltimore MD 21201.