Wall Street Underground

By Nick Guarino | January 30, 2017

Time to set up trades to Make Money
Trump Guarantees our OIL trade!
Trump Opens up pipeline construction.
Which means it’s time to load for bear.

January 30, 2017

Dear Subscriber,

President Donald Trump last week on Tuesday approved construction of two oil pipeline projects that have been fiercely disputed and were delayed under his predecessor.

Trump signed executive memos that will make it easier for TransCanada to construct the Keystone XL pipeline and for Energy Transfer Partners to build the final uncompleted portion of the Dakota Access pipeline.

One of the biggest problems the North America on shore oil industry faces is the lack of pipelines to bring all the oil and natural gas new technologies are producing to market.

Keystone would be a nearly 1,200-mile pipeline that would take about 800,000 barrels a day of Canadian sands oil from Alberta to Steele City, Nebraska, where it would meet up with a southern leg of the pipeline that could send it to the Gulf Coast refineries. See chart on left.

The Dakota Access pipeline would take oil south from the Bakken in North Dakota. The 1,172-mile pipeline would stretch from the oil-rich Bakken Formation — a vast underground deposit where Montana and North Dakota meet Canada — southeast into South Dakota, Iowa and Illinois. The oil potential in Bakken is massive. An estimated 7.4 billion barrels of undiscovered oil is believed to be in its US portion, according to the US Geological Survey.

After the Dakota Access pipeline is completed, it would shuttle 470,000 barrels of crude oil a day, developer Energy Access Partners said. From Illinois, the oil could go to markets and refineries across the Midwest, East Coast and Gulf Coast. See chart right:

This is the death of OPEC and it GUARANTEES in my opinion that oil will plunge eventually to $10.00 a barrel. It brings vast new supplies of oil to not only the US market but to the world.

The market constantly underestimates the speed that new oil comes to market. And the effect increasing inventories have on price. Look at the chart of the collapse of oil prices below:

The chart clearly shows as the fracking revolution lifted production, oil prices plunged from $115 a barrel to $25 a barrel a year ago. As you know we nailed it and took profits on the 2016 low. Since then oil has had a small rally.

What is driving the oil market is a ha, ha, ha OPEC production cut agreement. What a sick joke.

OPEC announced that for the first time in at least a decade the Organization of Petroleum Exporting Countries and other producers are reducing crude output. Saudi Arabia has said more than 80 percent of the targeted reduction of 1.8 million barrels a day has been implemented.

OPEC will reduce supply by 900,000 barrels a day in January, the first month of the accord’s implementation, said the Geneva-based Petro-Logistics. That’s about 75 percent of the cut that the producer group agreed to make. Eleven non-members led by Russia are to curb their output in support.

OPEC members Saudi Arabia, Kuwait and Algeria have said they’ve cut output this month by even more than was required, while Russia said it’s also curbing production faster than was agreed. Saudi Energy Minister Khalid Al-Falih said that adherence has been so good that OPEC probably won’t need to extend the accord when it expires in the middle of the year.

Don’t buy this crap. OPEC has constantly underestimated cheating by its members and the shale and oil sands revolution. And now these pipelines that they spent a fortune getting the greenies and Indians to block will be built and fast.

The OPEC price fixing rally has spurred a surge in drilling in the U.S. shale patch. Rigs targeting crude in the U.S. rose by 15 to 566 last week, the highest since November 2015, according to Baker Hughes Inc. “U.S. output in 2017 will be 1 million barrels a day higher than last year.”

That means that US production has already eaten up more than half the OPEC production cuts. Now add the pipelines coming on stream and all the rigs bringing in new wells and you can see why I believe oil is doomed. The price will crash!

So it’s time to make the oil and oil related trades in anticipation of the coming major bust in oil. Nothing can stop it in my opinion.

Of course the Wall Street spin machine will do their damnedest to convince everyone that OPEC will save the day. Remember another drop in oil prices will kick the oil companies off the edge of a cliff. It will devastate not only oil companies but the investment banks that have loaned them a fortune. So consider this your advance warning, more oil trades are coming in the next day or two.

Shit, I am loving it.

Thank you,
Nick Guarino

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