The Red Sea crisis initially created a buzz around an oil rally in 2024.
Sure, oil posted some gains after the Houthi attacks started last year.
But the supply disruption didn’t have a massive impact on the market.
And now, the potential for volatility has reduced significantly thanks to…
- Growing U.S. oil production ahead of the presidential elections.
- Chinese demand, a pivotal force in 2023, facing a shadow of doubt.
- The Organization of Petroleum Exporting Countries (OPEC)’s waning influence on oil prices amid high output from the U.S., Guyana, and Brazil.
Growing oil production — especially in the U.S. — means lower oil prices.
This usually means less pain at the pump for consumers like you and me.
But what’s the ripple effect on U.S. oil and gas firms and their stocks?
And more importantly, how can you take advantage as a retail trader?
Look at this simple formula:
Oversupply = weakening demand = lower prices.
If you understand this much, you’re already halfway there.
The other half is understanding how to structure your trading positions around energy companies that stand to benefit from stable or weaker oil prices.
Not sure how to do it?
See our approach to big oil profits.
Now, while oversupply casts a shadow over oil prices in 2024, we can’t completely rule out the potential impact of escalating tensions in the Red Sea.
Should things worsen — particularly with continued Houthi attacks — crude oil prices could experience a hesitant recovery. However, we’re not there yet.
The big elephant in the room so far has been U.S. oil production.
The impact of significant crude oil production cuts from OPEC members like Saudi Arabia and even non-OPEC members like Russia — which would have historically boosted prices — now faces skepticism from energy traders.
Rather than skyrocketing oil prices, their recent cuts caused a price drop.
Here’s one way to look at the big picture:
As long as U.S. oil production increases… as long as Chinese demand remains moderate… and as long as there are no significant surprises from the Middle East… Crude oil prices will likely remain relatively stable for months.
That’s bad news for most oil and gas production companies.
But it’s good news for companies that benefit from stable oil prices.
See how to target up to $25,000 in quarterly profits as this trend continues.
Stay blessed,
