Dave Gilbert here, Editor of Smart Money.
There’s always a bull market somewhere.
That’s one of those investing adages you hear all the time. And as with most adages, there is truth in it.
Even when stocks are struggling or just treading water, at least one corner (or more) of the market is usually thriving.
We see this playing out right now.
The S&P 500 is down more than 8% in 2022 (as of market close on Apr. 18, 2022), but take a look at the energy sector – especially crude oil – and you’ll see a bull market that is alive and well. The largest exchange-traded fund that invests in oil, United States Oil Fund LP (USO), has jumped 45% so far this year.
Oil prices surged after Russia’s invasion of Ukraine, and it’s easy to think the price spike is headline-driven and may well be temporary.
But the fact is, oil prices have been in a relentless uptrend for two years now. USO has surged nearly 4X since its lows in April 2020.
Eric Fry sees a promising future as well, which is why investors who ignore this oil boom risk missing out on one of the market’s best opportunities in the coming years…
A Historic Departure
Russia’s invasion of Ukraine has made it a “pariah,” as InvestorPlace CEO Brian Hunt accurately describes it. The nation has become an outcast for international trade and commerce.
As such, businesses are leaving, and none are more significant or impactful than Big Oil packing up their rigs and leaving town.
This is a huge deal. Brian writes:
Thanks to its enormous energy reserves, Russia has been one of the world’s largest oil- and natural gas-producing countries for decades.
In 2021, Russia was the world’s third-largest oil producer. It was essentially neck and neck with Saudi Arabia behind the top producer, the U.S. In 2021, Russia was the world’s second-largest natural gas producer.
In other words, Russia is a massive component of the global energy industry.
A large part of the world’s economic engine runs on Russian oil and natural gas.
And thanks to the exit of Big Oil from Russia, the country’s oil and natural gas industry is about to suffer serious harm.
The disappearance of 1 million… 2 million… even 3 million barrels of oil per day from the global market means oil could rise to $140 per barrel…. then $160 per barrel… and potentially $200 barrel and beyond.
It’s almost impossible to put Big Oil’s exit from Russia in adequate perspective. According to Brian’s research, Big Oil has invested more than $100 billion in Russia since the U.S.S.R. fell in the early 1990s. And that doesn’t even consider the vast amounts of time and expertise.
A New Phase of Prosperity and Opportunity
The only way to say it is that Big Oil is walking away from some of the largest investments ever made.
That doesn’t happen without sizable ripple effects… or maybe a “tsunami” is more accurate.
An enormous plunge in supply could be coming at a time of increasing demand, so oil companies can’t just lock the doors behind them and call it a day.
They must find ways to discover and produce more oil. It’s essential to the global economy, and it’s essential to their own success. If oil can’t come from Russia, it has to come from somewhere else.
In Eric’s new issue of Investment Report, he sheds light on how companies are moving forward:
Sir Isaac Newton’s memorable Third Law of Motion states that “for every action, there is an equal and opposite reaction.” Although this law is usually reserved for physics, it roughly describes the deglobalization megatrend we’ve talked about in this issue.
Because as corporations sever supply chains in one locale, they will establish equal supply chains in an “opposite” locale.
Case study No. 1 is Exxon Mobil Corp. (XOM).
On Mar. 1, the oil giant announced it would abandon its Sakhalin-1 project in Russia – a multi-billion-dollar venture that Exxon had been operating for decades on behalf of an international consortium of Japanese, Indian, and Russian companies.
Exxon grimly stated…
“We deplore Russia’s military action that violates the territorial integrity of Ukraine and endangers its people. In response to recent events, we are beginning the process to discontinue operations and developing steps to exit the Sakhalin-1 venture… Given the current situation, ExxonMobil will not invest in new developments in Russia.”
Just like that, Exxon scuttled billions of dollars of “sunk costs” and decades of exploration and development work.
But three weeks later, the company announced it had initiated exploratory drilling in a new area offshore of Brazil that could contain as much as one billion barrels of oil and gas.
In other words, “Farewell, Russia. Hello, Brazil.”
Exxon leads the prospect in the Sergipe-Alagoas Basin, northeast of Brazil, with a 50% stake. Interestingly, the rest of this new consortium features oil companies from the West, rather than from the East.
Brazil’s Enauta Participacoes SA (ENAT3.SA) holds a 30% stake with Houston-based Murphy Oil Corp. (MUR) holding the remaining 20%.
This is the first exploratory well of the nine blocks the three companies hold together in the Sergipe-Alagoas basin. If Exxon’s exploration is successful, it would be the company’s first oil discovery in Brazil as an operator.
Eric goes on to point out that Western oil companies were already seeking to boost production in the Americas. So he sees a new phase of prosperity for the U.S. oil and gas sector, and he expects energy stocks to continue hitting new highs in the months ahead.
Not all energy stocks have equal potential, of course, so Eric has devoted considerable time and research efforts to finding the sweet spots that offer attractive reward potential with acceptable risk… (We’ll tell you more about that tomorrow in a special bonus issue.)
So yes, there is at least one bull market somewhere, and it’s in oil right now. Bull markets in commodities tend to be driven by supply and demand imbalances, and Eric was on to this critical imbalance in oil well before the tragic war in Ukraine.
He saw this oil squeeze as an opportunity unto itself, and with the ripple effects producing other wealth-building opportunities.
Smart investors will want to learn as much as they can about how best to position themselves.
Editor, Smart Money
P.S. It’s human nature to take shelter in a storm – and the markets have been a hurricane recently. But Eric Fry, aka “Mr. 1,000%,” says that sitting on the sidelines is the worst thing you can do for your money. Because right now, what he’s calling the trade of the decade is brewing, and not taking advantage of it could be the biggest mistake of your investing career. Tomorrow, we’ll be back with a special issue that will show you how you can position yourself for success in this trade – and avoid regret later. Stay tuned…