The X Factor That Could Send Oil Prices Sky High

Written By Jason Simpkins

Posted January 16, 2024

Oil prices had a wild ride in 2023.

They started the year trading in the mid-$70s.

For a few fleeting weeks throughout the spring they even fell below the $70 level before gaining enough momentum to top out around $94 per barrel in September. 

I personally thought they’d stay there, but instead they dropped back down to end the year in the low $70s.

So after all that, we’re right back where we started last year.

However, also like last year, that’s likely to be crude’s floor, as the threat of supply cuts and/or disruptions remains ever-present.

To wit, both WTI and Brent crude climbed more than 2% in the first week of 2024 as Iranian-backed rebels continued their harassment campaign against cargo ships traversing the Red Sea.

And on Friday, they jumped 4% in a single day, hitting their highest level in weeks, due to regional conflict.

 

This is because attacks in the Red Sea have become so commonplace and dangerous that most major cargo companies are now diverting their routes away from the Suez Canal and around the Cape of Good Hope.

Just last week, the International Association of Independent Tanker Owners (Intertanko) — which represents almost 70% of all internationally traded oil, gas, and chemical tankers — warned members to “stay well away” from the area, even if it means taking longer, pricier routes.

The consequence of these adjustments is that shipping costs have almost tripled since late November.

And it’s only going to get worse, because the conflict between Israel and Hamas isn’t easing, it’s escalating.

So much so that the risk of the situation spiraling into a broader regional crisis that could impact other major shipping lanes like the Gulf of Oman and the Strait of Hormuz.

That’s why oil prices are rising even against the backdrop of higher inventories and tepid demand.

And that landscape is likely to shift as well, because OPEC will only tolerate low oil prices for so long before it issues another round of cuts to reignite prices.

That means this could be the best opportunity investors have to take advantage of the energy market all year.

Because oil prices are still relatively low. However, like last year, that won’t hold. 

They will inevitably march back up to $90 per barrel at the very least.

And potentially much higher if the conflict continues to escalate.

The best way to play this would be to check out this little-known energy firm out of Texas.

It’s extremely active in the Permian Basin, where it’s developed a new drilling method that’s the biggest breakthrough since fracking.

No joke, the new method effectively DOUBLES the amount of oil that can be extracted from a single well, boosting production and profits while minimizing costs and disruptions to the environment.

It’s one of the biggest reasons why U.S. crude production is set to top record levels over the next two years — despite declining rig activity.

So get all the details right here. Because this energy stock is poised to blast off regardless of what happens in the Middle East.

Fight on,

Jason Simpkins Signature

Jason Simpkins

Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more…

In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor’s page.

Be sure to visit our Angel Investment Research channel on YouTube and tune into Jason’s podcasts.

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