[TradeSmith Daily]( OPECâs Production Cut Adds Fuel to Our Commodity Supercycle Strategy
At TradeSmith, weâre here to help you separate the noise from what matters for your investing dollars, and one of the noisiest recent events is the OPEC+ oil production cut. Whatâs Happening
OPEC+, the 23-member cartel of oil-exporting nations, is cutting oil production by 2 million barrels a day. Why It Matters
The South, the East Coast, the Northeast, and potentially the Rockies are all expected to see higher gas prices as a result. What Could Happen
While response options are limited for the United States, a 2007 U.S. Congressional bill known as NOPEC (No Oil Producing or Exporting Cartels) that was never enacted is receiving renewed attention. It would allow the United States to sue OPEC and its oil companies under U.S. antitrust law for attempts to limit oil supplies. Most recently, the NOPEC bill, S.977, passed the Senate Judiciary Committee, showing bipartisan approval. The bill still needs to pass the full Senate and House — and be signed by the president to become law. RECOMMENDED LINK [INVESTING IS DEAD!](
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What It Means for You
NOPEC is an interesting storyline, but itâs a hypothetical. The bill has reached this point before, and thereâs no guarantee it would even pass. Weâre focused on how the oil production cut happening here and now could affect you as an investor. Oil prices have already been high this year as demand outstrips supply. As production decreases and the oil supply shrinks, the supply and demand imbalance will be exacerbated, causing prices to rise further. Global demand for energy is only growing, for oil and natural gas as well as for renewable energy.
The issue is that renewable energy has not scaled as fast as many expected, which has led to underinvestment in oil and natural gas. For instance, there was half as much capital investment in oil and natural gas in 2021 as there was in 2014. And thatâs creating an investable opportunity that Senior Analyst Mike Burnick is calling the “commodity supercycle.” [In Part 1]( of Mikeâs commodity supercycle series, he detailed how this situation formed. [In Part 2]( Mike shared three energy investment opportunities that fit his criteria of having high levels of free cash flow and strong dividend growth. Weâve also been keeping you ahead of potential energy supply and demand imbalances, which could cause your heating bill to go a lot higher this winter. RECOMMENDED LINK [Great stock. Terrible time to get in.](
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