This is
G&G Associates Tax & Financial Consulting
e-Newsletter
OPEC Threatening World's Largest Oil Producers
Hotep G&G Readers,
Saudi Arabia is rattling the oil sector … and that's bad news for some of the most popular oil stocks on the market.
Last month, the leader of the Organization of the Petroleum
Exporting Countries (OPEC) – the oil cartel that has effectively set
the oil price for decades – raised the export price of crude oil to
Asia… but cut the export price of crude oil to the U.S.
The market went crazy. Oil prices slumped to multiyear
lows. News outlets everywhere shouted that Saudi Arabia was taking a
shot at the U.S. shale boom.
But they're wrong … While it's true that U.S. shale
companies will be affected by low oil prices, Saudi Arabia is actually
threatening Canadian oil producers.
Let me explain …
-------------------------------------------------------------
Internal Sponsorship:
Want to Know How to Take Advantage of Falling Energy Prices?
If you get paid in dollars and hold the majority of your assets in U.S.
stocks or bonds, your wealth is in significant danger (401K’s, TSPs,
403Bs, Mutual funds, etc).
To become a member of the G&G Investment Society (GGIS) newsletter
subscription to learn how to take advantage of some of our suggestions
so you can protect your wealth and portfolio against a fallen dollar,
send an e-mail to GGIS@gngassoc.com and/or visit our website at
www.gngassociates.net and click on the “Products & Services” link
and we’ll get you signed up right away.
DON'T WAIT ANOTHER DAY!
- 1 year subscription - $149
- 2 year subscription - $269
- Lifetime subscription - $699 {50% off tax prep & 25% off consulting services for life}
*** Membership Guarantee *** If you don't make your money back from
being a GGIS member by the end of your subscription...we'll refund 100%
of your subscription fee back. That's how confident we are that this
will be one of the best financial moves of your life.
-------------------------------------------------------------
As regular GGIS Portfolio Readers readers know, new drilling techniques have allowed the U.S. to tap into vast oil and gas reserves locked away in shale.
This sent U.S. oil production soaring 63% from the low in
2008 to today. That's a massive increase in a short period of time.
The "tight oil" coming from U.S. shale is light, sweet
crude oil. What our oil refiners really want – what they were set up to
run – is the heavier, sour crude oil … the kind that comes from Canada
and Saudi Arabia.
That means the U.S. still imports crude oil from Canada
and Saudi Arabia. But over the past few years, the U.S. has been
shifting from importing oil from Saudi Arabia to importing oil from
Canada.
From 1994 to
2000, Canada and Saudi Arabia were roughly equal in terms of oil
exports to the U.S. But as you can see from the chart below, since 2000,
the U.S. has looked more to Canada than the Saudis for oil imports...for obvious reasons.
Over the
past few years, this reversal has really shown. In 2013, the U.S.
imported an average of about 1.3 million barrels of oil per day from
Saudi Arabia. In August, that fell to just 894,000 barrels per day.
That's a 31% decline in imports.
Meanwhile, the U.S. imported 3.1 million barrels of oil
per day from Canada in 2013. In August, that number went up to 3.4
million barrels per day. That's a nearly 10% increase in imports.
So ... a lot of the imports the U.S. cut from Saudi Arabia are
now coming from Canada. For Saudi Arabia, this has been a huge hit to
its sales. It's hard to find new buyers for crude oil right now. So, as any cartel would do to secure their turf, Saudi Arabia is taking a shot at Canada because it knows it can likely
win a price war.
You see, much of Canada's crude oil comes from tar sands.
The tar sands are full of thick asphalt-like bitumen. To extract oil,
tar-sands producers have to dig up bitumen and run it through expensive
processing facilities to produce quality crude oil. That's much more
expensive than conventional oil production in Saudi Arabia – which
essentially consists of sticking a straw in the ground and watching oil
gush out.
Because of these high costs, tar-sands companies have thin profit margins.
When oil rises, these thin margins can soar… and share
prices soar with them. But when oil prices fall, this leverage works the
other way… and share prices can plummet.
The best tar-sands companies need to get $50 per barrel
for their oil to break even. The rest need between $50 and $90 per
barrel. Today, a barrel of bitumen sells for around $56. So many tar-sands
companies are losing money. And the best ones are watching their
profits get squeezed. The squeeze is already affecting these companies'
share prices. Many are down low double-digits since June.
And with Saudi Arabia pushing down the price of oil, profits – and share prices – are going to fall even more.
We saw something similar happen in 2008.
During the global crisis in 2008, the price of oil
plunged. It ended up falling nearly two-thirds from the start of 2008 to
its bottom in 2009 at $34 per barrel. The decline nearly killed the oil
sands sector. But with Saudi Arabia essentially
starting a price war with Canada, I recommend staying out of Canadian
tar-sands companies right now.
But, their lies other opportunities because in the world of investing, as one stock/sector declines, their is another one benefiting. The key is .. do you know how to take advantage of these opportunities.
G&G Associates
is on Twitter
Join
“G&G Associates” on Twitter. If you have a smart phone or online
twitter account you can sign up to receive tweets from us. This will
keep you in the know with current market moving updates, let you know
when we have changes to our website, inform you of recent newsletter
postings, and it will also be a good medium for improving your tax &
financial IQ.
You can find us on Twitter by searching for the handle "GG_Associates."
As always…feel free to pass this information on to anyone you think is interested in increasing their tax & financial IQ.
If
you need a one-on-one consultation to learn how to implement these
investments or any other tax or financial strategy mentioned in these
newsletters, feel free to contact my office to setup an appointment.
Good Investing!
Ankh Uja Snb (Life, Health & Strength)
Asar Maa Ra Gray
Tax & Financial Consultant
G&G Associates
757-271-6068 office
866-361-3872 toll free fax
www.gngassociates.net
Become a Fan of G&G Associates on Facebook & Twitter.
Philosophers aren’t psychics … they are good historians. Knowing
your history will allow you to interpret and understand the present …
Knowing how to interpret the present, will allow you to predict the
future.”
Dr. Kaba Kamene
LEGAL NOTICE:
This work is based on what I’ve learned as a financial researcher and
analyst based SEC filings, current events, interviews, corporate press
releases and what I've learned as a financial consultant. It may contain
errors and you should not base investment decisions solely on what you
read here. It’s your money and your responsibility. Nothing herein
should be considered personalized investment advice.
