What would happen if WTI actually did go to $50/bbl
Posted: Mon Apr 28, 2025 6:52 pm
Notes below are from Keith Kohl on 4-28-2025
There is a disconnect between reality and fantasy in the oil markets today.
Do you see it? If so, your portfolio will thank you for it later. When WTI crude prices plunged below $60 per barrel earlier this month, I tried warning you that oil stocks were a screaming buy.
Look, no matter how bearish you are on oil prices, the cold, bitter truth is that $50 oil would be disastrous for future energy security; nobody is disputing this fact. The trouble with cheap oil is that prices this low will spurn all hope of production growth here in the United States.
In fact, it already HAS.
Given the current low-commodity price environment, I told you that it was only a matter of time before we’d see it impact drilling activity. For now, just push aside the fact that the number of oil rigs actively drilling in the lower-48 states has been falling for seven straight weeks… which is bad enough.
Some of the biggest oil companies are already starting to cut back on spending, too. Chevron announced a few weeks ago that it was slashing its 2025 capital budget by $2 billion, which includes a sizable reduction in the Permian Basin.
They’re not alone, either. Both Exxon and ConocoPhillips — two of the largest players in the Permian — are also reducing capital spending in the region this year.
The dominoes are starting to fall thanks to cheap oil, but there’s still time to sit up and take notice before the rest of the market catches on.
We’ll get to that in just a second…
If you’ve ever wondered just how hard reality can hit us sometimes, look no further than our current Energy Security’s miraculous 180° flip over the current state of our oil markets.
If you recall, it was only a couple of weeks ago that Energy Secretary Chris Wright stood up and confidently said that the U.S. shale industry wouldn’t just survive $50 oil — it would thrive!
Like you, I still can’t believe he managed to keep a straight face when saying it.
Now, it seems as if reality has finally caught up with him after he told everyone that $50 oil was not sustainable for producers.
This sudden about-face makes it clear that he knows exactly what we knew all along — oil prices are inevitably heading higher from here. < This is why, as FEAR of the Tariff War fades, investors are going to roll money back into upstream oil & gas companies that have a lot of "Running Room" in North America's best oil & gas basins. Some of the most profitable upstream independents are in our Sweet 16 Growth Portfolio and their shares are "On Sale".
He’s not the only one that’s getting things wrong.
The Only Way To Make Money In Oil Today
Perhaps more interesting than the u-turn that Secretary Wright made this week regarding oil prices is the continual resistance by the IEA to accept that the global supply/demand fundamentals for oil are going to put upward pressure on prices.
Despite admitting that global oil demand hit its highest rate in two years — up 1.2 million barrels per day compared to a year ago — the IEA is sticking to the notion that it’ll slow through 2026. This is not to mention the optimistic supply growth forecast it continues to hold on to.
Well, you know what they say, right? Forecasts were made to be revised.
Unless the trade war currently taking place takes a turn for the worse, which is still a possibility, cheap oil prices will limit any potential supply growth. More importantly, if the rumors over OPEC+ accelerating supply growth next month turns out to be more gossip than fact, things will get even tighter.
This leads us to the only real way to make money in the U.S. oil patch. You see, some of the biggest players in oil aren’t just slowing drilling activity, they’re adjusting their strategy to take advantage of new drilling and completion techniques to lower costs and boost efficiency. < Matador Resources (MTDR) is reporting strong results from "U-Turn horizontal wells".
That “drill, baby, drill” mentality is what led to the debt-fueled drilling frenzy a decade ago.
I told you before that the game has changed for them, and Chevron is a perfect example of what I mean. The company is planning on utilizing a technique called ‘triple-frac’ to cut both the time and money spent on each well in the Permian Basin.
In fact, Chevron plans on using this ‘triple-frac’ technique on half of its wells in the region — more than double what it was doing last year.
This is how you maximize your profits in the Permian.
There is a disconnect between reality and fantasy in the oil markets today.
Do you see it? If so, your portfolio will thank you for it later. When WTI crude prices plunged below $60 per barrel earlier this month, I tried warning you that oil stocks were a screaming buy.
Look, no matter how bearish you are on oil prices, the cold, bitter truth is that $50 oil would be disastrous for future energy security; nobody is disputing this fact. The trouble with cheap oil is that prices this low will spurn all hope of production growth here in the United States.
In fact, it already HAS.
Given the current low-commodity price environment, I told you that it was only a matter of time before we’d see it impact drilling activity. For now, just push aside the fact that the number of oil rigs actively drilling in the lower-48 states has been falling for seven straight weeks… which is bad enough.
Some of the biggest oil companies are already starting to cut back on spending, too. Chevron announced a few weeks ago that it was slashing its 2025 capital budget by $2 billion, which includes a sizable reduction in the Permian Basin.
They’re not alone, either. Both Exxon and ConocoPhillips — two of the largest players in the Permian — are also reducing capital spending in the region this year.
The dominoes are starting to fall thanks to cheap oil, but there’s still time to sit up and take notice before the rest of the market catches on.
We’ll get to that in just a second…
If you’ve ever wondered just how hard reality can hit us sometimes, look no further than our current Energy Security’s miraculous 180° flip over the current state of our oil markets.
If you recall, it was only a couple of weeks ago that Energy Secretary Chris Wright stood up and confidently said that the U.S. shale industry wouldn’t just survive $50 oil — it would thrive!
Like you, I still can’t believe he managed to keep a straight face when saying it.
Now, it seems as if reality has finally caught up with him after he told everyone that $50 oil was not sustainable for producers.
This sudden about-face makes it clear that he knows exactly what we knew all along — oil prices are inevitably heading higher from here. < This is why, as FEAR of the Tariff War fades, investors are going to roll money back into upstream oil & gas companies that have a lot of "Running Room" in North America's best oil & gas basins. Some of the most profitable upstream independents are in our Sweet 16 Growth Portfolio and their shares are "On Sale".
He’s not the only one that’s getting things wrong.
The Only Way To Make Money In Oil Today
Perhaps more interesting than the u-turn that Secretary Wright made this week regarding oil prices is the continual resistance by the IEA to accept that the global supply/demand fundamentals for oil are going to put upward pressure on prices.
Despite admitting that global oil demand hit its highest rate in two years — up 1.2 million barrels per day compared to a year ago — the IEA is sticking to the notion that it’ll slow through 2026. This is not to mention the optimistic supply growth forecast it continues to hold on to.
Well, you know what they say, right? Forecasts were made to be revised.
Unless the trade war currently taking place takes a turn for the worse, which is still a possibility, cheap oil prices will limit any potential supply growth. More importantly, if the rumors over OPEC+ accelerating supply growth next month turns out to be more gossip than fact, things will get even tighter.
This leads us to the only real way to make money in the U.S. oil patch. You see, some of the biggest players in oil aren’t just slowing drilling activity, they’re adjusting their strategy to take advantage of new drilling and completion techniques to lower costs and boost efficiency. < Matador Resources (MTDR) is reporting strong results from "U-Turn horizontal wells".
That “drill, baby, drill” mentality is what led to the debt-fueled drilling frenzy a decade ago.
I told you before that the game has changed for them, and Chevron is a perfect example of what I mean. The company is planning on utilizing a technique called ‘triple-frac’ to cut both the time and money spent on each well in the Permian Basin.
In fact, Chevron plans on using this ‘triple-frac’ technique on half of its wells in the region — more than double what it was doing last year.
This is how you maximize your profits in the Permian.