Oil Stock Investments: You Need To
Pay Attention To This Industry Right Now…
The Dynamic Wealth Report
February 2, 2011
by Justin Bennett, Editor
The last couple of weeks have been interesting for energy investors…
Tunisian protests in late December put North Africa on edge. Protesters
successfully ousted President Zine El Abidine Ban Ali with the help of
the country’s military.
Tunisia’s protests didn’t have much effect on world markets. But the
success of the Tunisian riots has other North African countries
following suit. Citizens are fed up with years of corruption and poor
living conditions.
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Now, protests in Egypt have the oil market on pins and needles…
Egyptian protesters want the basics… better employment, better living
conditions, and honest leadership. The riots are ongoing and likely
won’t end until Egyptian President Hosni Mubarak steps down.
The dictator has been in power for three decades and many feel his time
is up.
All the turmoil is setting the energy markets on fire. WTI (West Texas
Intermediate) Crude oil shot up 8% in the last three trading days to
nearly $93… multi-year highs.
Why the big spike in crude?
Fears of supply disruptions are raging due to Egypt’s control of the
Suez Canal and numerous oil and gas pipelines. Even though a relatively
small amount of oil is transported through the canal by tankers, the
news is enough to send oil rocketing higher.
The main worry is the social unrest could spread to countries like Saudi
Arabia and Libya.
While the scenario is unlikely… it could happen. And if it does, we
could be due for an even larger spike in oil prices in the near future.
Those countries are major producers and even the slightest whiff of
unrest will send the oil market skyward.
How should energy investors take this information? As an opportunity!
But let me explain something…
First and foremost, we hope for social justice for citizens of these
countries. All walks of life deserve freedom to choose their destiny.
Clearly, North African citizens have been repressed by their leaders for
far too long.
But the news out of the area is uncovering an opportunity for investors…
The potential behind US onshore oil and gas producers is finally going
mainstream. The Egyptian news has sent many US energy companies gushing
to new highs.
Producers like Whiting Petroleum (WLL) and Brigham Exploration (BEXP)
are surging in recent days. These two companies are well positioned in
some very profitable oil and gas plays here in the US.
But it’s not only the US producers seeing strong gains…
Companies with assets in the Canadian oil sands are seeing huge investor
interest as well… like Suncor Energy (SU).
Why all the love for these North American onshore producers?
Obviously, surging oil prices have a lot to do with these stocks moving
skyward. Higher oil prices mean more profits for the companies.
But there’s something else going on…
Energy companies with a large portion of assets in politically stable
areas like the US and Canada are being viewed as a “flight to safety”
for energy investors. There’s basically no chance of supply disruptions
(outside of a pipeline leak) for these companies.
On the other hand, take a look at Apache (APA)…
The stock took investors on a wild ride in recent days as Egyptian
unrest unfolded. Since the company has sizeable assets in Egypt,
investors suddenly took notice of the additional risk. It didn’t take
long before investors fled, driving shares of APA lower.
The stock dropped nearly 13% from the recent highs before buyers stopped
the bleeding.
The bottom line is this…
Investors are rewarding North American onshore oil companies with a
premium due to the location of their assets. And don’t expect the
phenomenon to stop any time soon.
Companies like SU, WLL, and BEXP will continue to make investors a
pretty penny as oil prices rise.
You may want to consider these companies for your own portfolio!
• Sugar (Over $0.34 a pound)
A Southern Hemisphere Category 5 cyclone is threatening Australian sugar
crops. Cyclone Yasi is expected to make landfall today and experts are
predicting heavy damages. Sugar prices continue to defy gravity as they
surge to over 30-year highs.
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