Matt Badiali is a geologist who knows that he cannot trust what other people tell him about an investment until he visits the location and examines it for himself. That is how he had the opportunity to inspect mines and oil wells in Switzerland, Turkey, Haiti, Singapore, Hong Kong, Iraq and Papua New Guinea. He also interviewed various CEOs and analyzed a ton of geologic data. After several years of traveling the world in this capacity, he now knows when an investment opportunity is a good one and when it is not.
Matt Badiali says that higher oil prices are on their way, and it will happen when fall begins. The 2015 agreement with Iran allowed the country to export oil to other nations. It could also trade with those other countries, but the United States recently pulled out of this agreement.
The U.S. didn’t just pull out of the Iran agreement. It also placed sanctions on Iran that can be expected to be in place in November. In July, Iran was exporting 2.2 million barrels of oil each day, but the United States, Russia and Saudi Arabia are not capable of replacing this amount of oil.
Matt Badiali says that the sanctions are coming at a very bad time. The demand for oil is increasing, and one major producer of crude oil is failing as a state. In Venezuela, oil production is decreasing every month, so there’s less oil for the world at this moment. When Iran can no longer export crude oil, the market is going to be even tighter.
China is one country that does not accept the fact that there are going to be sanctions on Iran, and it is going to import Iranian crude oil whether there are sanctions or not. In January of this year, China increased its crude oil imports from 450,000 barrels daily to 806,000 barrels daily in July according to Bloomberg.
The United States and China are also in the middle of a trade war, and if this goes on for much longer, some experts say that the American economy could suffer because of it. These analysts expect American consumers to stop spending as much money in the stores and making as many investments in the markets. Then, the world’s demand for crude oil will start to go down.
Unfortunately, China is in a position to sabotage everything that the U.S. wants to do in Iran, and Matt believes that they are doing exactly that. Right now, they are importing more oil from Iran, and this could really obstruct the United States’ plans. China is a major importer of U.S. crude oil, but it could reduce the amount of crude oil it imports. If it also increases the amount of Iranian crude oil imports, China would be damaging U.S. policy.
Several other nations are also importing crude oil from Iran, and they include South Korea, Japan, India and some European nations. Some of them agreed with China, and they took the opportunity to criticize the U.S., but their oil companies plan to make other arrangements for their crude oil purchases. For example, the chairman of Indian Oil Corporation Sanjiv Singh assured the world that India would be receiving its supply of crude oil even if Iran cannot import oil for a time.
This company obviously has other plans.
China and India purchase more Iranian oil than any other country, but this could come to an end. Currently, Iran exports more than 1 million barrels of oil to the European Union, the United Arab Emirates, Japan and South Korea. These countries will need to purchase crude oil from the United States, Saudi Arabia and Russia to make up for the amount of oil that they will lose.
Saudi Arabia has been increasing its production of crude oil lately. In the first quarter of 2018, it produced 9.95m bbl/day to approximately 10.44m bbl/day in the month of June. This is a significant increase compared to the recorded amount of output in 2017.
OPEC has stated that it is in a position to flood the market with more crude oil. Even so, crude oil production decreased in July, and this indicates that prices will remain stable. Without Iranian crude oil, the market is vulnerable to any negativity that presents itself, and the IEA has stated that if crude oil prices rise, it could slow down the demand for these products.
Oil prices will not necessarily rise because some countries begin to purchase more American crude oil. The market currently has excess inventory in the amount of 900,000 barrels per day, so this means that there isn’t anything else that can go wrong.
It’s not possible for the oil supply from Venezuela to decrease any further. Nigeria’s supply and Libya’s supply cannot be disrupted. The Middle East will have to remain calm. Provided that those predictions remain true, the prices of crude oil should remain where they are today. If they do not, Matt Badiali says that crude oil prices will really start to be volatile and will rise to the highest levels.
It seems strange, but speculators are expecting things to be exactly as Matt Badiali described them above. Speculators haven’t been more bearish on oil prices since 2016 according to the Commodities Futures Trading Commission’s Commitment of Traders report.
According to Matt, consumers are going to be the losers when oil prices begin to rise because higher oil prices mean that everything will cost more, but all hope is not lost. Matt also has one suggestion that he can give to his readers. With an increase in the demand for oil, the pipelines can be expected to be full in the near future. Because of this, Matt expects to see more dividends coming in from the big pipelines.
Matt’s position is long on crude oil in his Real Wealth Strategist newsletter, and he hopes that his readers will follow his lead.