It’s official: Our government ran a record $180.7 billion over budget in July, the Treasury Department said today. That’s just a bit over Wall Street expectations and just under the Congressional Budget Office estimate we reported Monday. Thus the government tab so far this fiscal year is a record $1.27 trillion, not the record $1.3 trillion the CBO guessed earlier this week. Phew… what a relief.

A few more scary details:

• The budget deficit is still on track to exceed $1.8 trillion by October, the end of the fiscal year. That would be four times last year’s record budget
• July spending rose to over $332.2 billion, an all-time high
• Government revenues fell 5.6% from last June, to $151 billion
• Those revenues have been lower than the same month the year before for 15 straight months.

And we doubt Uncle Sam will get much help from tax revenues anytime soon… even “cash for clunkers” couldn’t save American retail sales in July. The Commerce Department’s July retail sales number shocked the Street this morning, down 0.1%, despite expectations of a 0.8% rise.

The government’s cleverly acronymed Car Allowance Rebate System (CARS) program did help — without auto sales, the retail gauge would have fallen 0.6%. But the lowly consumer has made his point: Even with free money deals from Uncle Sam, retail is not ready to “get back on track,” as the Obama administration likes to say. In fact, even if the Street’s wish came true, we’d still be a long way from the old status quo.

In a similar vein, Wal-Mart’s latest sales numbers missed expectations this morning. While still profitable, the world’s biggest retailer saw same-store sales fall 1.2% in the second quarter — well below the Street’s forecast of a 1% rise.

Interestingly, Wal-Mart enjoyed 13 straight months of better same-store sales from April 2008-April 2009. Then they suddenly stopped reporting monthly sales and switched to quarterly. Now, in their first quarterly report, sales are down. Hmm… must be a coincidence.
We don’t blame Joe Consumer for resisting retail, even “everyday low prices.” After all, another 558,000 Americans filed for unemployment for the first time last week. Initial claims rose by 4,000, says the Labor Department today. 6.2 million people are now receiving unemployment benefits.
U.S. foreclosures rose to another record high in June,says RealtyTrac today. One in 355 households, or about 360,000 homes, were in some form of foreclosure during the month. As we mentioned yesterday, roughly one quarter of all mortgages are worth more than the present value of the homes they cover.

That’s not good for the average home price, down 15% last quarter to $174,100 (existing single-family home).

Well, at least troubled homeowners can count on the Fed to keeping pinning down refi rates… Uh-oh:
Mark your calendars… the Fed has promised to stop manipulating the bond market by October.

That’s the meat of the news from yesterday’s Federal Open Market Committee meeting. They will “gradually slow” the pace of its official Treasury purchases, but the $300 billion program will now run through October instead of ending in September, as the Fed had previously scheduled.

(Of course, as our friend Chuck Butler often points out, that’s just the official word. The Fed has other ways to skin this cat. For example, they’re rumored to be striking deals with primary dealers for post-auction purchases. Instead of making official bond purchases at the auction, the Fed will have a primary dealer buy the bonds and then sell them to the Fed… same debt monetization, but without that pesky “transparency” and media attention.)

Outside of the Treasury bond announcement, the FOMC statement was about what you’d expect: Interest rates were left at 0% and will remain “exceptionally low” for an “extended period.” While “economic activity is leveling out,” it will “likely remain weak for some time.” And, of course, “inflation will remain subdued for some time.”
“The Fed doesn’t exist to help you,” says our currency man Bill Jenkins.

“Central banks do not exist for the good of economies. They do not exist for the good of citizens. Their sole purpose is to keep the game going, and to profit from it as long as possible. After that, they clear out, leaving the taxpayers to pay off their debts. Their protection and enhancement of economies and citizens is just a means to an end. As long as it helps the profits roll in, helping others is fine. But in the end, they will foist responsibility to others.

“For us, we will trade with all this in mind as each bank assesses its role in the global finance arena… knowing that they will begin raising rates as soon as possible, and sometimes even before. When they do, it will give us huge opportunities to profit. Rising rates almost always guarantee soaring currencies.

“Particularly I would look for the U.S. dollar, Europe, Aussie and United Kingdom. Australia will provide the real runaway as long as China can get some exports up and running. If this recovery gets some legs (which is still problematic in my mind), they already have the upper hand with an interest rate multiple times higher than the others.”

Will you profit from this trend? Have Bill help you reap the benefits by checking out Master FX options Trader.
The Fed’s announcement hit just about every market…bonds, stocks, currencies and commodities.
No surprise that the Fed’s announcement hurt bond prices. Not only did they forecast the end of their official purchases, but that “leveling out” talk also hints of higher interest rates, and thus lower bond prices. The yield on a 10-year jumped as much as 10 basis points, to 3.7%, on the news. But this morning it’s already given it back on the heels of the latest retail and jobless numbers.
Stocks rallied in advance of the FOMC meeting in expectation of some kind of good news. Up 1.3% before the announcement, the S&P 500 seemed content with the Fed’s lilywhite forecast and finished up 1.2%.
The dollar was perhaps yesterday’s biggest loser. That brief “good for the economy, good for the dollar” trade from last Friday is dead in the water. Traders took no comfort in the Fed’s soothing announcement and bid the dollar index down a full point, to 78.2 as we write.
Thus commodities are on the up and up. Gold’s up about $10, to $957 an ounce. Oil gained a buck and is now just below $71 a barrel.
“I had the unique opportunity,” writes Byron King, “to tour two different oil sands operations near Fort McMurray, in northern Alberta. I saw a massive open-pit oil sands mine, and the associated reclamation effort, operated by Syncrude Canada Ltd. I also visited an in situ oil sands recovery project called Surmont, operated by ConocoPhillips.

“When we think about the concept of ’Peak Oil’ today, we need to keep in mind what we’re talking about. The curves show oil output peaking in so many parts of the world. This phenomenon is quite real, as long as you understand that it’s the light, sweet, easy-flowing oil that is getting harder and harder to find, certainly in significant quantity.

“But there are a lot of other hydrocarbon molecules out there. Most of those molecules are not light, sweet crude oil. Indeed, most of the hydrocarbon molecules that the world will use in the future will be ’heavy,’ with lots of carbon atoms and not so many hydrogen atoms.

“Here’s a graph from oil services giant Schlumberger that estimates the world’s heavy oil and bitumen resources. Canada’s 400 billion cubic meters of bitumen translates into something like 1.4 trillion barrels of oil equivalent. How much is that? Well, it’s about SEVEN times the total oil reserves of Saudi Arabia.

“Sure, there are still issues about land disturbance, settling ponds, water usage, gas usage and myriad of other things that come up when you’re spending billions of dollars on a major mining effort. But Syncrude has built its business model around dealing with the ’other’ issues, and not just moving oil sands and recovering oil products. Don’t underestimate the ability of the Alberta government to regulate its energy producers. This is a long way from Appalachia.

“Meanwhile, we’re talking about literally billions of barrels of bitumen (or oil equivalent) that the process makes available to the North American marketplace. And if the United States wants to get onto its environmental high horse about the source of the hydrocarbons from the oil sands — and tax or ban their importation — there are other buyers in the world. Like the Chinese, who have racked up many frequent flyer miles on their treks to Fort McMurray.”

There are stocks to own no matter who wins the battle over Canada’s oil sands… find them here, in the Outstanding Investments portfolio.
One surprise batch of data today: France and Germany are technically out of recession. Both nations reported 0.3% GDP growth for the second quarter today. Given that the two are now Europe’s biggest economies, that’s surprisingly good news.

Should make for some fireworks from the PIIGS (Portugal, Ireland, Greece, Spain and an extra I for Italy) when the two start pestering the ECB to raise rates.
“You mention that the short interest on stocks fell 12% in two weeks,” a reader writes. “No surprise there. With the SEC issuing its rule prohibiting ’naked short selling,’ risking personal insolvency to predict falling prices is now illegal. And just as there is now no ’downtick rule’ or mark-to-market accounting (not to mention the federal government’s interdiction against accurate financial reporting — a.k.a. ‘stress testing’ — and its outright ownership of significant areas of the economy, subsidized by the taxpayers), there is now no investment whistle to blow to sound the alarm for the unsuspecting public.

“Of course, much of the unsuspecting public is now so caught up in the economic game of musical chairs known as the Obama administration that they are too busy (and broke) to pay attention. This does not bode well for the futures of our children or our children’s children … you know, the ones to whom we are passing the buck!”
“I served in the U.S. Navy for 8 years and did my share of ’spending like a drunken sailor,’” another reader writes. “I take offense at the notion that drunken sailors spend like power-mad politicians. Drunken sailors only spend what is in their pocket or what they won playing poker on the ship, but nonetheless once they’re broke, drunken sailors quit spending (and usually pass out).

“Please have your readers try to find a more appropriate analogy to wasteful spending by crooked politicians because those of us who were, and the ones who still are, drunken sailors spend within our means on things that are important to us (booze and babes). Thank you for your attention.”

The 5: Point taken… no sense in giving drunken sailors such a bad name.

Source: Budget Insanity, FOMC Down-Low, Oil Sands Investing and More!

It doesn’t matter whether you believe in “Peak Oil” because this isn’t about Peak Oil coming to fruition. Peak Oil believes that oil discoveries have peaked leading to oil production’s inevitable decline.

This crisis will be strictly man-made. Governments and oil companies have already planted the seeds of the next great energy crisis. And there’s nothing anybody can do to prevent those seeds from sprouting.

The U.S. government got its religion late. But it’s now following the lead of European governments in limiting the use of fossil fuels through taxes and restrictive regulations.

That’s bad enough in itself. But then there’s the roller-coaster ride which oil prices have taken. The price of oil fell more than $100 from over $140 to under $40 (before going back up again).  Oil companies everywhere had the same response. They all cut back on oil spending and production…

•    OPEC has cut back production by 2.2 billion barrels a day.
•    UAE has put off plans to expand oil production by 1 million barrels a day.
•    Saudi Arabia has delayed two $10-$20 billion refining projects (and may cancel them altogether).
•    Russia’s biggest oil company, Gazprom, has slashed production spending by 24 percent.
•    Venezuela, Nigeria, Malaysia and other national oil companies have cut back on their capital spending.
•    Statoil, EnCana, Petro-Canada, Suncor, Imperial Oil, and Royal Dutch Shell have all delayed or cancelled major        projects in Canada’s vast but expensive-to-produce oil sands.

How bad are these cutbacks? Just ask the widely respected oil consulting agency, the International Energy Agency. It recently warned of a “second capacity crunch” causing widespread underinvestment in the oil industry.

Oil’s recent price rise could have loosened up oil producers’ purse strings. But oil companies are facing increasing disincentives from a government trying to replace fossil fuels with renewables.

If you want to know how the CEOs of Big Oil feel about the Obama administration’s energy policy, just ask Jim Mulva, head of ConocoPhillips.
This global oil company has operations in more than 30 countries. Mulva said last week that government intervention in the energy market “has an impact on the willingness of companies to pour billions into the development of new projects.”

In the meantime, the Obama administration is spending hundreds of millions of dollars on renewables, like the $467 million to encourage the development of geothermal and solar energy.|

The result? Geothermal and solar energy will have slightly bigger pieces of the energy pie. But oil priced at over $150 per barrel will kill the U.S. and global economic recovery in its infancy.

The cost of plastics and resins will go way up. Gas prices will surge over $5/ gallon. New highs in jet fuel will crash several airline companies. Actually, practically everything will cost more. I don’t think that’s what these governments have in mind.

And even with ample government support you shouldn’t invest in geothermal or solar companies. They will still depend on government subsidies to compete with the price of electricity generated by – take a guess – fossil fuels.

Instead you should invest in oil producers but not just any oil producer. Thanks to vast underinvestment and government policies, the price of oil will sky rocket. The only thing keeping the price of oil from going higher right now is that we’re still in the middle of the worst recession in seven decades.

But once demand returns, watch out.

Total’s CEO Christophe de Margerie says that a rise in demand while supply is constrained will unleash oil prices again.
And Mitsubishi warns that spare capacity will quickly disappear when oil demand picks back up.

But, as I said, most oil companies have cut back production and spending. That’s going to prevent them from getting windfall profits from soaring oil prices.

But four of the world’s major oil companies haven’t cut back on spending. Three of them are Exxon Mobil, Chevron and Thailand’s PTT Exploration & Production. But by far the best oil investment you could make is in a fourth big oil company.

Last year it spent 34 percent more on drilling for oil. And this year it’s spending 19 percent more. While the other oil majors are cutting back on spending and facing stagnant output, this company plans on raising production by 7-11 percent a year. I’m predicting its shares will go up at least 80 percent over the next three years, and the gains could be much bigger than that.

I’m sorry but I can’t give you the name of the company because it’s my latest recommendation to readers of my INCOME service. They deserve first crack at this company, especially since its price is so cheap at the moment. But if you’re interested in this company, just click here for more information, including how to sign up in order to get this company as your first recommendation.

Source: The Coming Global Blackout

]]> http://www.contrarianprofits.com/articles/the-coming-global-blackout/18794/feed 0 http://www.contrarianprofits.com/articles/835-and-counting-with-ishares-brazil-etf/17839 http://www.contrarianprofits.com/articles/835-and-counting-with-ishares-brazil-etf/17839#comments Fri, 12 Jun 2009 18:57:43 +0000 Contrarian Profits http://www.contrarianprofits.com/?p=17839 Payout Trader editor and Crisis Strategy Alert senior analyst Charles Delvalle says Russia and Brazil are entering the big leagues. Yesterday, these two BRIC nations announced they are buying a combined $20 billion of bonds from the International Monetary Fund (IMF). According to Goldman Sachs analyst Alberto Ramos, “They’re not buying IMF bonds to diversify reserves. They want to be seen as having a large voice in global markets.”

This from a recent email Charles sent through to Notes HQ:

I’m a big believer in emerging markets – especially Brazil, which has some of the most resilient consumers in the world. It has also kept inflation at bay, while improving its balance sheet. And it’s set to become the Saudi Arabia of offshore oil, with finds of…

Oil topped $50 a barrel on Monday, boosted partly by expectations OPEC will agree on a deep supply cut this week to try to prop up prices.

A weaker dollar also lent support to oil, which has fallen about $100 from a record high of more than $147 in July, as the global financial crisis has hit demand for fuel.

Goldman Sachs has predicted oil could go as low as $30.

U.S. light crude for January delivery rose to as high as $50.50, topping the $50 line for the first time since early December. It was trading $3.00 up at $49.28 by 1421 GMT.

It has rebounded by more than 20 percent from a 4-year low of $40.50 a barrel on Dec. 5.

London Brent crude gained $2.89 to $49.30.

Members of the Organization of the Petroleum Exporting Countries are in agreement on the need to cut output when they meet on Wednesday in Algeria.

“Everybody is supporting a cut,” OPEC President Chakib Khelil told reporters in Oran. [ID:nLF25582]]

He said Saudi Arabia, the world’s biggest exporter, has cut its supply by 8 percent and this had affected the market.

Since early September, OPEC has said it would reduce supply by a total of 2 million bpd, but prices continued to slide until a rally late last week, spurred partly by Saudi Arabia’s supply cut.

MARKET EXPECTS BIG CUT

Analysts say another 2 million bpd cut is needed from OPEC because demand will remain weak into 2009.

“We think should OPEC go for anything less than 2 million barrels a day, participants would be inclined to use this as a selling opportunity,” said Edward Meir of MF Global in a research note.

“The cartel is simply too far behind the curve to consider anything less than that,” he said.

“With global oil demand expected to continue falling through much of 2009, the pressure is on the cartel as well as non-OPEC producers such as Russia to remove excess production from the market,” said Jonathan Kornafel, Asia director of Hudson Capital Energy in a note.

OPEC’s Khelil said Russia, the world’s biggest exporter outside OPEC, had offered the group its “concrete support.”

There is already plenty of evidence that the world economic downturn has dampened demand for oil.

In China, the world’s second biggest energy consumer, implied oil demand shrank by about 3.5 percent in November from the year before, the first decline in nearly three years, Reuters calculations showed.

Khelil estimated there was an oversupply of 400 million barrels currently in the oil market.

He said he expected global oil demand to drop by 200,000 barrels per day in the first quarter of 2009 and by another 1.2 million bpd in the second quarter.

Jane Merriman
LONDON, Dec 15 (Reuters)

The Reuters/Jefferies CRB Index of 19 commodities has fallen more than 54% from its July peak and is now at its lowest level in six years. Oil spearheaded the decline, with light, sweet crude for January delivery dropping $2.36, or 5.4%, to settle at $41.31 a barrel on the New York Mercantile Exchange Friday. Black gold has tumbled 71% since peaking at a record high of $147 a barrel in July.

Actual gold is down 27% from its record high of $1,032 an ounce, reached in March. Prices for other commodities such as copper, zinc, platinum and corn have shared in the decline as well.

“Everybody is just trying to get out of the markets,” Michael Aronstein, president of Marketfield Asset Management, told Bloomberg. “People are exiting as fast as they can.” Everybody except Jim Rogers, that is.

“Commodities will be the place to be if and when we come out of” the recession, Rogers said an interview with Bloomberg. “The only thing where fundamentals are unimpaired are commodities.”

Rogers reasons that underinvestment will lead to a supply crunch in commodities that will send prices soaring.

“Farmers cannot get loans for fertilizer now. Nobody can get a loan to open a zinc mine,” he said. “So we are going to have some serious, serious supply problems before too much longer.”

In an interview with Money Morning earlier this year, Rogers pointed to a lack of investment and production in the energy sector as a main reason for oil’s run-up in price.

“Every oil country in the world has declining reserves except Saudi Arabia,” Rogers said. “And I know that every oil company has declining reserves.  So unless somebody discovers a lot of oil very quickly in very accessible areas, the surprise is going to be how high the price stays, and how high it goes.”

Now that the global recession has stomped down crude prices, oil companies no longer have the incentive or the funding to develop new sources. Earlier this year, for instance, ConocoPhilips (COP) and Saudi Arabian Investment Co. (ARAMCO) were forced to postpone bidding on the construction of a 400,000-barrels-per-day (bpd) export refinery at the Yanbu Industrial City.

“We see and hear about energy investments being delayed… This is a major worry and could lead to a supply crunch and much higher oil prices than we’ve seen before,” Fatih Birol, the International Energy Agency’s (IEA) chief economist, told journalists in London last month.

The IEA says oil demand will rise 1.6% a year on average between 2006 and 2030. That means demand will rise from the current level of 85 million bpd to 106 million bpd.

To meet that demand, the agency estimates the world needs $26.3 trillion in supply-side investment over the next 21 years. About 7 million bpd of additional capacity needs to added to the market by 2015, the agency said.

Gold is another commodity that could make another record-breaking run.

Demand for the yellow metal actually increased by a record 45% from the second quarter to the third this year.

“I own some gold,” Rogers told Bloomberg. “And if gold goes down I’ll buy some more and if gold goes up I’ll buy some more. Gold during the course of the bull market, which has several more years to go, will go much higher.”

Investment Guru Jim Rogers Says Commodities are the ‘Place to Be’ Despite Their Decline

Oil leapt 6 percent on Monday to more than $43 a barrel, as a rebound in global equity markets and further evidence of supply cuts by top exporter Saudi Arabia helped the market break a six-session losing streak.

Prices dropped 25 percent last week, their biggest weekly fall in nearly 18 years, depressed by the world economic outlook.

U.S. crude for January delivery was up $2.56 to $43.37 a barrel by 1003 GMT. It fell more than 6 percent on Friday to close at $40.81, its lowest since December 2004.

London Brent crude rose $2.56 to $42.30 a barrel.

“Prices are higher on account of a short-covering bounce from extremely oversold conditions,” Edward Meir, of futures broker MF Global, said.

“OPEC’s meeting is nine days away, meaning that we could see some strengthening leading into the meeting,” he said.

Oil has fallen more than $100 a barrel from a record peak above $147 in July, as the credit crisis has started to hurt the wider economy and shrink demand for fuel.

Members of the Organization of the Petroleum Exporting Countries have called for more supply cuts when the producer group meets on Dec. 17 in Algeria.

SAUDI CUTS BACK

OPEC has already agreed to cut about 2 million barrels per day (bpd) of production. Top exporter Saudi Arabia has just provided further evidence of its intent to keep the taps tight.

The kingdom told at least two oil refiners in Asia on Monday it would deepen oil supply cuts to as much as 10 percent of normal contracted volumes in January versus a 5 percent cut in December supplies. It also reduced January supplies to some European refiners.

But OPEC may need to make an additional cut of as much as 2 million bpd to bolster prices in a market where demand is falling.

“The current downturn in prices has already priced in at least a 1.5 million bpd cut,” Tetsu Emori, a commodities fund manager at Japan’s Astmax Co. Ltd, said.

Monday’s rally spanned the commodities complex, with gold and copper rebounding strongly. European shares were firmer after strong gains in Asia.

Oil’s steep losses on Friday followed a U.S. employment report which showed the heaviest job losses in 34 years in the world’s top energy consumer.

But global markets have taken heart from efforts by Washington to finalize a rescue for the struggling U.S. auto industry.

Oil could also find support from predictions of a cold winter in the United States, with December set to be the coldest since 2000 on average.

Jane Merriman, Osamu Tsukimori, Jonathan Leff
LONDON, Dec 8 (Reuters)

Oil fell more than $2 to below $53 a barrel on Monday after OPEC decided to wait until mid-December to make another cut in output to try to defend sagging prices.

U.S. light crude for January delivery was down $2.28 at $52.15 a barrel by 1200 GMT.

Oil had settled at $54.43 on Friday after a shortened post-Thanksgiving holiday session. On Nov. 21, it touched a three and half year low of $48.25.

London Brent crude was $2.05 lower at $51.44 a barrel.

“The markets are discounting OPEC’s decision to stand pat by selling off,” said Edward Meir, analyst at broker MF Global.

“When it comes to calibrating supply and demand to fit the new post-September economic realities, OPEC seems to be in a state of denial,” he said in a research note.

Oil is down by almost two-thirds from a peak of more than $147 a barrel in July. Prices fell almost 20 percent in November and 32 percent in October, their biggest monthly fall ever, despite OPEC’s around 2 million barrels per day cutbacks.

A global economic slowdown that has tipped a growing number of countries into recession has caused sharp falls in demand for oil.

But OPEC’s Gulf producers want to see strict compliance with the producer group’s existing output curbs of 2 million barrels per day (bpd) before agreeing to any more.

“FAIR PRICE”

“I was a little surprised they didn’t announce anything stronger,” said Simon Wardell, senior oil analyst at IHS Global Insight. “I think this (meeting) was to underline that everyone really needs to work together.”

The Organization of the Petroleum Exporting Countries (OPEC) meets next in Algeria on Dec. 17.

Saudi Arabia on Saturday pointed to $75 a barrel as a “fair price” for oil, the first time in years that the world’s biggest exporter has identified a target for crude prices.

Saudi Oil Minister Ali al-Naimi in Cairo cited this price as necessary to keep more expensive new projects at the margins of world supply on track.

“I believe $75 is the price for the marginal producer,” he told reporters in Cairo.

On Sunday he told the Saudi-owned al-Hayat newspaper the effect of OPEC’s existing cuts was still not clear.

In Cairo, OPEC ministers discussed how much more they needed to cut. Most, including Gulf producers led by Saudi Arabia, saw the need to trim another 1 to 1.5 million bpd.

OPEC Secretary General al-Badri told reporters in Tehran on Monday: “It will be a good amount, a good quantity,” without naming a specific figure.

Analysts said OPEC’s delay could prove costly.

“The longer OPEC waits to cut supplies, the higher stocks rise and the longer we think it’ll take for fundamentals to tighten once the tide does turn,” Jan Stuart, an economist with UBS in New York, said in a weekly U.S. oil data report.

By Jane Merriman
LONDON, Dec 1 (Reuters)

In fact, Opec has ALREADY been increasing production – and it has had little effect on the oil price. The oil cartel pumped an average of 32.24 million barrels per day (bpd) of crude in May, an increase of 370,000 barrels from the previous month. This is almost half the proposed new hike for next month. This 370,000-barrel increase in May had little effect on the oil price – and I reckon the latest plan will be just as ineffective as well.

I also believe that the Saudis will be pumping close to their limits after this production hike. They will be able to support any short-term increase in production as its Khursaniya oil field is expected to come fully on stream next month. However, the original plan for that field was to ramp up its production slowly, while using the new stream to allow some of the country’s older fields to rest.

Also, the field was expected to start pumping oil in 2007, but only started producing in 2008 because of technical delays. And even then, it was expected to produce 500,000 barrels per day, but is currently able of producing just 300,000 barrels per day.

So, with the Saudis close to full capacity they may not even manage to increase output by the 200,000 noted by the UN Secretary General. Even if they did – I don’t expect the oil price to fall by much. With world oil consumption currently at around 87m barrels a day, a 200,000-barrel increase represents just a 0.2% increase in production… that’s hardly spectacular, is it?

At Smart Commodities we know the best ways to profit from the oil market. Our portfolio contains what we like to refer to as the complete energy play. Three stocks, three different ways to profit – and gains that look set to keep on growing. Find out how to bank potentially huge profits – in an exciting variety of ways – right now.

Regards,

Garry White
Editor Smart Commodities UK

Source: Saudi’s Fail In Bid To Slash Oil Price: Here’s Why It’s Time To Buy Oil

Violence has shut about 20% of Nigeria’s oil production since early 2006.

“The market is so concerned about supply that just about any headline can unnerve traders,” said Phil Flynn, of Alaron Trading. “Once prices began moving higher, there was a massive move to purchase futures.”

Also yesterday, the International Energy Agency said it will attend talks convened by Saudi Arabia on June 22 between producers and oil-consuming countries in an environment of record oil prices.

“We would welcome an opportunity to act collectively to reassure the market about future demand and supply balances in order to change the perception of extended tightness,” said IEA Executive Director Nobuo Tanaka.

Source:  Oil Rallies as Roller Coaster Continues - Nigeria Moves to Stabilize Production

A colleague and I flew to Alberta and drove from Edmonton to Fort McMurray to visit an area I call America’s Gas Tank… the Canadian tar sands.

The drive took five and a half hours along what some people call the “world’s most dangerous highway.” It’s a narrow road traveled constantly by heavy trucks. Near Edmonton, the landscape is rolling dairy farms, dotted with oil and gas wells among the cows. About an hour away from town, you enter a pine forest that stretches for miles and miles.

Below those trees lies the largest oil deposit outside Saudi Arabia.

North of Fort McMurray, you come across the Syncrude mine. A mile-wide break in the forest stretches out in both directions. It takes something like two years to prep a site for mining. A company has to clear the trees and carefully strip off the muskeg, which is like topsoil, to use again when it remediates the area. Then miners strip off the top layers of sand to get to the tar layer.

The air is thick with the smell of raw oil. The shovel I stood in came right out of the mine, left on the side of the road as a monument when its replacement came. Today, the region’s three mines generate more than 860,000 barrels of tar-sand oil a day.

Just five years ago, these tar sands were more experiment than money machine. Those huge mining shovels are expensive, and refining the bitumen costs more than refining the light, sweet crude oil that comes through the drill pipes at work in other parts of the world. All told, mining a barrel of tar sand costs roughly $35. Back in 2003, oil traded for about $30 a barrel, and the only two companies mining here barely broke even.

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Today, oil costs more than $125 a barrel, and the experiment is over. It’s more of an explosion…

Forward-thinking oil companies began moving into the Alberta oil sands when oil prices climbed into the $50-a-barrel range. As oil prices moved past $60, the big oil companies started to scramble for tar-sand lands. They needed to get a slice of the world’s largest safe oil deposit. It was like a giant game of musical chairs, without enough chairs.

The companies lucky enough to find a seat are investing awesome amounts of money for the long run. An estimated $159 billion has been spent on infrastructure (mines, pipelines, power lines, wells, etc.) so far. Another $80 billion will be spent over the next two years.

That’s because, outside of Saudi Arabia, this is one of the only places in the world with spare production capacity. However, “turning on the taps” in an oil field takes time… even in Saudi Arabia.

In addition, many traditional oil-producing nations are generating much less than in years past. The single best example is OPEC member Indonesia. The country’s oil production declined 35% over the last 10 years. It no longer exports oil… Now Indonesia must import it. The country will quit OPEC at the end of this year. Mexico is also a big oil producer. It provides 11% of U.S. oil imports. Its production is declining.

At the same time, the developing world is consuming more and more oil. China alone is importing 10%-15% more oil this year than last year. Russia, the Middle East, India, and Latin America are all consuming more oil as their economies develop. We aren’t discovering nearly enough new large fields to meet this new demand.

This is why oil costs more than $125 a barrel. It’s also why the Canadian tar sands are so important… and why every commodity investor should be invested here for the long term. You shouldn’t just see this area as an investment however… look at it as a hedge against soaring gasoline prices. Sure, you many spend a hundred bucks to fill up the SUV, but you’ll be earning great returns on your oil money.

To get started on further research, check out the natural gas and infrastructure plays I’ve written about in these pages. There’s also an inventive oil sands ETF administered by Claymore. It’s tiny (far too small for me to recommend to my S&A Oil Report readers) and trades… where else but in Canada!

Good investing,

Matt

P.S. For my top ideas in Canadian oil sands, check out the latest issue of the S&A Oil Report. It’s a totally risk-free subscription, and you’ll probably make back the entire cost within a month in our next big Canadian winner. Click here to learn more.

Source: Here’s Where to Find the World’s Most Interesting ETF