Hello!
OIL PRICES POP…
OPEC+ cut production by 1MM BPD this weekend.
As expected, Oil prices spiked with WTI rising above $81 for a few hours, and settling down as of this writing just under the $80 mark.
Combine that with Russia’s cut of 500k BPD last week, and the world is adjusting to the Fed’s latest rate hike, which historically creates some demand destruction.
Obviously the Strategic Petroleum Reserve continues to look like a gas tank near E. The vehicle is still moving, but the miles remaining til empty are dwindling daily. With any sustained increase in pricing, that dangerous story will persist.
This whipsaw volatility will likely continue as other economic wrinkles continue to play into supply, demand, and pricing.
THE WORLD HAS DECLARED WAR ON THE DOLLAR…
The world is already moving away from using the Dollar as its reserve based currency.
This has been brewing for quite some time…dating back to 2001 when Goldman Sachs economist Jim O’neill coined the acronym BRIC (Brazil, Russia, India, China).
BRIC was essentially a brand, if you will, for his thesis that these four economies would dominate the global economy by 2050. South Africa was added in 2010 expanding the acronym to BRICS.
Why would the BRICS economies dominate? Simply put, growth. These countries have the greatest upside for economic growth based on a number of factors.
That upside for growth, complimented by the slowing growth of the US and Europe, creates opportunity for those countries to abandon the US Dollar as their reserve currency.
(Credit to Investopedia for providing a simplified understanding of the background on BRICS. You can see that article here.)
How real is all this?
Last week, Brazil and China struck a trade deal to ditch the US Dollar. Also last week, China and France completed a first-of-its-kind LNG transaction. Why was it unique? Two reasons: 1) the US dollar was not the base currency, 2) the Chinese CBDC was used. And that’s China’s digital (crypto) currency folks.
So, what does that all mean for those of us with dollars in the bank and Oil in our portfolio?
The short answer is, a weaker dollar and higher Oil prices. Does that translate to more profit opportunities for Oil investors? In theory, yes. But as fast as this is all moving, there are still a lot of variables yet to play out.
King’s Chief Economist, John Mauldin and Chief Growth Officer, Eric Rice are working on a collaborative effort to dig deeper into this topic in the coming weeks.
Stay tuned for more information on that.
TRAVEL AND NEWS FROM INSIDE KING…
I traveled this week to the 6th Annual Hart Haynesville DUG Conference in Shreveport, LA. It was great seeing some old friends and also made some new ones. I look forward to exploring opportunities with them in the future.
As King continues to expand acreage positions, as many as three rigs have been running at one time. With that comes substantial investment in science…particularly in the Big Horn basin (Wyoming), and the Permian basin (Texas).
Investing in science is an important but challenging activity because the cost is considerable in both time and money. And it’s difficult to budget because you don’t know what you need to know until you’re deep in the ground. Focus on science, again while important, has also put production behind.
Nonetheless, we expect it to pay off in the end when positioning assets for divestiture. While the science isn’t the same thing as producing well, it is the next best thing.
But a great Team and lots of capital are required to make it all happen. See below if you are accredited and want to learn more about how you may be able to achieve monthly passive income, a multiple on invested capital, and significant tax savings.
Recommended Reads
BRICS Countries Keen on Having Common Currency to Replace Dollar
China & France Complete First LNG Gas Trade Using Chinese CBDC
Will EVs Really Crush All Oil and Gas Demand?
Beyond taxes, there are some outstanding results beginning to come in with the current KOPX Program 4. If you are not in it, and you are accredited, it’s a good time to have a conversation. You can schedule a Zoom here.
