Investing Daily

Some have argued that the recent decline in oil prices represents an abnormal trading pattern or the beginning of a bear market in oil. But past experience doesn’t support that conclusion.

Producers will earn below average returns on Iraqi contracts but will need to spend big on services to meet their contractual goals.

No other industrial democracy in the world has an asset similar to Canada's oil sands. Resource constraints brought on by new demand from China, in particular, and India will be far easier to navigate if we take an open-minded approach to it.

And as he exhorted the private sector to basically tell a better story Canadian Environment Minister Jim Prentice provided real help by saying Canada wouldn’t adopt its own climate change legislation until the US passes a bill.

A series of recent deals across a wide swathe of energy-focused sectors are setting up 2010 as another big year for M&A activity. Once again, ExxonMobil is a primary instigator.

Some exploration & production firms are looking to grow their oil production more than 50 percent in 2010 by exploiting unconventional oil plays like the Bakken Shale. At current oil prices most producers believe that wells in the core part of the Bakken Shale offer after-tax returns on investment of 100 percent and remain profitable even at significantly lower prices.

As I remain bullish on oil’s long-term prospects, this week’s installment of Emerging Market Speculator features energy expert Elliott H. Gue’s take on key developments in the global oil market. Mr. Gue is the editor of The Energy Strategist and MLP Profits.

At this point, oil sands production of 3.2 million barrels a day by 2020 seems more inevitable than a United Nations-brokered agreement on climate change.

Estimates from experimental tests indicate that the process can recover as much as 80 percent of original oil-in-place while partially upgrading the crude oil in situ.

Korean National Oil Company’s decision to buy Harvest Energy Trust is curious on many levels. But the difficulty resource-hungry SWFs and SOEs face is that most of the plum assets--productive and located in safe jurisdictions--are already under the control of global resource heavyweights.

The end of easy oil remains arguably the most powerful driver in the sector, though the unprecedented drop-off in demand that occurred in the wake of the credit crisis and resultant economic dislocation has obscured this long-term trend. But with the global economy and credit markets now on the mend, this theme should come back with a vengeance over the next few quarters.

As production from existing oilfields decline, producers will need to drill more aggressively and use more sophisticated production techniques to stem decline rates. And as production from easy-to-produce fields wanes, producers will be forced to target ever more complex fields such as those in the deepwater.

Oil prices serve as a barometer of economic growth because increased consumption in emerging markets goes hand in hand with economic expansion. It’s essential that global investors understand oil price movements.

Consumer and producer behavior from 2004 through mid-2008 is not consistent with artificially high oil prices. The speculation argument has little basis in reality. The real cause of rising prices is unusually strong demand growth coupled with sluggish supply response despite record spending.

Although crude could still retest its July lows, economic stabilization in the US combined with resurgent growth in emerging markets is bullish for energy commodities and related stocks through year-end. In the near term, the stock market will be focused on second-quarter earnings. In today's issue I take a detailed look at earnings releases from three companies that have broader implications for energy-related investments.

I reiterate my outlook for crude oil prices, in addition to analyzing Iraq's failed auction of oilfield production contracts and the real prospects for alternative energy in the US.

A report by the US Geological Survey (USGS) found that 25 areas inside the Arctic Circle contain about a fifth of the world’s undiscovered but recoverable oil and natural gas reserves.

Most in the media hailed the House of Representative's passage of climate change legislation as a major victory for President Barack Obama. Clearly, the president lobbied hard for bill to clear the House before the July 4 holiday; the president is trying to push both health care and climate change legislation through Congress this year. In this issue, we'll take a look at how carbon legislation is likely to affect your energy investments and look at a handful of companies that may actually benefit from carbon cap-and-trade.

Look for buying opportunities as the markets stutter, and don't sweat the spate of capital raises among master limited partnerships.

As commodity markets stabilize, the groups most leverage to this recovery tend to be services and contract drillers. I've written extensively about services companies in the past few issues of The Energy Strategist. In this issue, we'll take a closer look at one of the most widely watched--and poorly understood--sectors of all, the contract drillers.