Bakken Oil Profits

To call the explosion of the Deepwater Horizon oil rig and the subsequent well damage that’s allowed millions of gallons of oil spill into the Gulf of Mexico a tragedy is an understatement.   

 

Eleven men died when that rig exploded on April 20th. And now, critical fisheries along the coasts of Louisiana, Alabama and Mississippi are being destroyed. The commercial fishing industry in these states is threatened and a way of life for these fishermen may be coming to an end.   

 

An oil slick is reportedly nine miles off the coast of Pensacola  

 

BP itself is under siege, too. The stock is in a virtual freefall as repeated efforts to cap the leak have failed. It could be months before the leak is stopped. Costs to the company could hit $22 billion. And that’s if BP didn’t do anything wrong. 

What Will Make Oil Prices Rise this Summer?

Oil investors
are looking
for any reason for oil to go up in price these days.  We all tacitly
know
that much higher oil prices are coming. But with the economy in a
perpetual
cycle of stagnation, continued bad news from Europe, and concerns that
growth
is stalling in China,
oil can’t seem to find a foothold. 

But I believe
that oil is
one minor war-action away from higher highs this summer. 

That brings me
to something
my wife and I encountered yesterday. 

I should note,
I’m writing
today’s issue from a hotel room in Boston. 
My wife and I are celebrating our first wedding anniversary this week. 

After spending
yesterday
afternoon ferrying between Boston’s
harbor islands, we encountered what I believe may be the catalyst for
higher
oil prices this summer. 

In Boston
Common, amid the
hot dog stands and balloon vendors, hundreds of pro-Palestinian
protesters
greeted us on our walk back to our hotel in Back Bay. 

BP Shares Fall 15% on Well Failure

It’s getting ugly for BP (NYSE:BP). The company’s latest attempt to plug
the well that’s gushing oil into the Gulf of Mexico has failed. And the
"back-up plan" – a relief well drilled to relieve the pressure from the
leaking well – will take two months to complete. That’s two more months
of oil gushing unfettered in to the Gulf waters, two more months of
damage to Gulf Coast businesses, two more months of damage to BP’s
reputation and share price.

TradeMaster’s Jason Cimpl

I hope you all had an enjoyable long weekend. I also hope you enjoyed the”subscriber’s only” market analysis video that TradeMaster Daily Stock Alerts Jason Cimpl shared with us on Friday.  

 

Every Friday, Jason makes a video for his TradeMaster members where he shares his top-notch chart analysis and provides a forecast for the coming week that includes everything from the”big picture” view to specific entry points on his top stock recommendations.

 

Jason has identified virtually all of the important turning points for a variety of assets over the last year. His TradeMaster readers made money when natural gas prices bottomed in October of 2009. They were ready when the U.S. dollar bottomed in December 2009. They caught big moves in oil and were perfectly positioned for the tech stock breakout that started in March 2010. They even made money when the stock market sold off on the European debt news.

Sustainable Energy Opportunity

I
have
to
say right out of the gate that I am extremely skeptical of investments
in
general. That’s the only way to be if
you value your investment capital and hope to make it work for you in
the
markets. Being generous and trusting are
good qualities in a boy scout, but not an investor. We
need to be skeptical misers.

So when it comes
to an
industry that’s largely unprofitable, filled with failure, buoyed only
by
government grants and lots of hopeful talk from environmentalists, I’m
wont to
be even more skeptical, if that’s possible.

It’s been said
before, but
it bears repeating: wind and solar only work when it’s windy or sunny. You simply can’t rely on these two
technologies as they are and get anything close to the electricity
generation
that’s required to power today’s infrastructure.

I’m confident
that solar
power will one day come into viability on a large scale, but there’s
still the
problem of what to do if the sun doesn’t shine. You hear environmentalists throw around the word “sustainability”
a
lot. It’s actually kind of humorous,
because there’s NOTHING sustainable about getting our electricity
generation
from ANY of the current green alternatives.

Let me back up
and define
sustainability from an environmentalist’s perspective.

My Natural Gas ETF Report

I’ve been teasing a full
write up on why I
think the United States
Natural Gas ETF (NYSE: UNG) may have
been designed to lose money. If you’ve
had the misfortune of owning this ETF, you are keenly aware of this
tendency. In the past 9 months, the
price of natural gas climbed off the floor of $2.75 per thousand cubic
feet up
to nearly $4.25 today. That’s a 55%
gain. In that same time period, UNG lost
27%.

As a reminder, UNG is NOT a double inverse
ETF, but you
wouldn’t know it from looking at those results. That brings me to crux of why this ETF does not perform the way
you
might expect it to, and how you can avoid making investments in similar
ETFs that
are more tar-pit than gold-mine. After
all, the first rule of investing is “Don’t lose money.”

Investors typically think
of ETFs as baskets
of equities, with performance naturally reflect the rise or fall of the
value
of those stocks. The United States Natural Gas Fund (UNG) ETF is
structured a
bit differently than other ETFs available to the public. According to the
United
States Natural Gas fund website
:

China Plays Ball

On Tuesday, I discussed in Daily Profit how cooperation between the U.S. and China was critical to helping investors get past the fears of the Euro debt problem, and keep the world focused on growth.   

 

I don’t think it’s any coincidence that last night, Chinese officials came out and said they were long-term investors in China, just as Treasury Secretary Geithner finished a round of meetings in China.  

 

This is exactly the type of cooperation I was talking about. China’s massive currency reserve and trade surplus are meaningless if the global economy goes back in the tank. So it’s in China’s interest to support the euro.   

A Deal with the Devil

It’s looking as though U.S. stocks made an important low yesterday. The S&P 500 fell below February’s low of 1044 and then made a powerful reversal to close at 1,074.   

 

Leading the way was Goldman Sachs (NYSE:GS). It put in a low at $134.20 and closed the day at $142.56. Today it’s up another $2 or so.   

 

This powerful reversal move by Goldman is significant for a couple reasons. One, it’s something of repudiation of the idea that financial contagion is spreading from Europe to the United States. And that fear has been driving stock prices lower over the past couple of weeks.   

Record Production from Bakken oil Wells

One of the top oil exploration companies drilling
in North
Dakota’s Bakken oil pool released results for two new wells today.

Initial flow results showed a peak rate of 3,171
and 5,035
barrels of oil equivalent a day (BOEPD). With these results, this
company now
has the two top producing wells in the entire Bakken play.