Yesterday, the Dow Jones gave up all its gains for 2023…
Interest rates are soaring … the 10-year Treasury yields are at their highest level since 2007.
And the 10-year real rate, which takes into account inflation, is at its highest in 14 years!
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The Prime Rate — the rate used as a reference point for pricing some loans such as mortgages, personal and small business loans — is the highest it’s been in 23 years!
Many consumers who have loans tied to the prime rate are now going to be entering into a world of pain.
Rising rates are not a good backdrop for stocks.
I know it looks kind of bleak for the market but that’s not the case in this market…
Crude oil.
In fact, crude is in the early stages of a bull market.
It’s up close to 30% since the end of June and it’s just getting started.
And just the other day the Strategic Petroleum Reserve, which is the United States’ piggy bank of oil for a rainy day, only has a 17-day supply.
It’s dropped from the historical average of more than a 30-day supply.
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Here’s why that’s very bullish for crude…
The SPR has a capacity to hold more than 700 million barrels of oil.
Right now, there are only 350 million barrels in storage — a 50% drop.
Eventually, the United States is going to have to fill the SPR back up.
Bottom line … they will need to purchase more than 300 million barrels…
That is a huge amount of pent-up demand that will drive oil prices, some analysts say, well north of $150 a barrel in a hurry.
If that wasn’t enough reason for higher crude prices … wait, there’s more…
- Low supply: Cuts by Saudi Arabia and Russia have reduced global oil flow. OPEC projects a huge daily deficit of oil as we head into 2024.
- High demand: Outpacing the supply. Demand around the world continues to increase as developing countries modernize.
- Winter is coming: Peak winter months mean lots of cold days and more fossil fuel to keep your home warm.
The oil benchmark, U.S. West Texas Intermediate crude, is already moving higher … from a low of $67 per barrel in June, to nearly $95 per barrel just a few days ago.
And the Biden administration is doubling down on “clean energy.”
The new energy plan will result in “the fewest oil and gas lease sales in [U.S.] history.”
This is just the beginning.
Over the past year or so I’ve been researching the energy markets.
What I found out turned me from a green energy Tesla driver to making a full 180-degree turn.
Just a few months ago, I reached out to a real pro in the energy industry…
Josh Young, founder and CEO of Bison Investments, a hedge fund which soared 349% in 2021.
Josh has oil running through his veins.
We talked about the inner workings of the industry, the supply-demand story, Chinese oil consumption and when, not if, oil will be heading higher.
If you don’t have a position in crude oil, it’s not too late.
And I highly suggest you listen in on our conversation here:
Regards,
Charles Mizrahi
Founder, Alpha Investor
P.S. I recently gave a presentation on a little-known oil company. It’s doing everything right.
It has hundreds of millions of barrels in oil reserves. Millions of acres of land it can drill on. Hundreds of millions of dollars in free cash flow. And zero bank debt.
