OPEC just made a historic deal.
As you probably know, OPEC, or the Organization of the Petroleum Exporting Countries, is a cartel of major oil-producing countries. Its members include Saudi Arabia, Iraq, and Iran. Together, the group supplies about 40% of the world’s oil.
For years, OPEC fixed how much oil it produced to keep prices high. It did what a cartel is supposed to do.
But last December, the organization abandoned its production ceiling for the first time since 1982.
It’s been every member for itself since then. In October, Saudi Arabia pumped a record amount of oil. Iraq and Iran have significantly ramped up output, too.
• In a way, pumping huge amounts of oil has been good for these countries…
They’ve had more barrels of oil to sell. And oil is the main export of OPEC member countries.
But at the same time, OPEC’s been flooding the global economy with oil. That’s a big reason why oil still trades for less than half of what it did two years ago.
That’s also why the cartel has been trying to cut back on production all year. But every time OPEC tries to put together a deal, the talks go nowhere… That is, until now.
• Yesterday, OPEC announced its first production cuts since 2008…
Bloomberg Markets was one of the first major outlets to break the story:
OPEC will reduce output by about 1.2 million barrels a day by January, the group said, fulfilling a plan sketched out in Algiers in September to cut its production to 32.5 million barrels. The agreement exempted Nigeria and Libya, but gave Iraq its first quotas since the 1990s.
OPEC also asked non-members like Russia, the world’s largest oil producer, to pump less oil. According to Bloomberg Markets, non-OPEC countries will cut production by about 600,000 barrels a day.
• The price of oil spiked 9.3% on the news…
It was oil’s biggest one-day jump since February. Today, it’s up another 2.7%.
Oil is now trading above $50 for the first time since October.
Major oil stocks surged, too. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which tracks 60 oil producers, rocketed 11.6% higher.
This is a huge move for a fund like XOP. Some investors might see this and think oil stocks will keep soaring. They might even dive headfirst back into the oil market.
But there’s something you need to remember…
• The price of oil is still 52% below its 2014 high…
Many oil companies still can’t make money at current prices. They need $60 oil or higher to break even.
So, if you want to own oil stocks, make sure you “look under the company’s hood” first.
We encourage you to stick with companies that have strong balance sheets. A company with little debt and a lot of cash should be able to weather the storm if oil prices stay low or start falling again.
We also like companies that can make money at sub-$50 oil. You see, high oil prices encourage companies to pump more oil. And many projects that couldn’t make money at $45 oil are suddenly profitable at $50 oil.
Companies with projects like these could soon turn their wells back on if oil stays above $50. If enough companies do this, the industry could flood the market again. That could keep oil prices low for a long time.
• Earlier this year, Crisis Investing editor Nick Giambruno recommended a company that checks these boxes…
That company, EOG Resources (EOG), is one of the top U.S. shale producers. It’s as close to a sure thing that you’ll find in the shale oil industry.
Still, EOG wasn’t a “no-brainer” investment when Nick recommended the stock back in March. You see, oil hit a 12-year low just six weeks before Nick told his readers to buy EOG.
At the time, many oil companies were bleeding cash. Others couldn’t pay their lenders. Some even went bankrupt.
Most investors wanted nothing to do with oil stocks. But Nick saw the crisis as an opportunity.
According to Nick, a genuine crisis can give you the chance to buy a world-class business for dirt-cheap prices. Occasionally, you’ll get an opportunity to buy a dollar’s worth of assets for a dime or less.
• In March, the oil market was one of the most hated markets on the planet…
Nick used this negative sentiment to his advantage. He recommended EOG at a 35% discount to its 2014 high.
His bold investment has paid off huge for Crisis Investing readers. EOG has surged 15% over the past two days. It’s now up 40% in only nine months.
Now, Nick doesn't rate EOG a "buy" at current prices. But the good news is that he has an even bigger crisis investing opportunity on his radar right now.
• Before we reveal this opportunity, you need to understand something about crisis investing…
This strategy is about more than just buying assets after a major downturn or financial crisis.
You can also make money as the crisis starts to unfold.
The trick is to identify assets that will crash the hardest during a crisis. You then bet against those assets. If you’re right, you can make huge gains when most investors are taking heavy losses.
And that’s exactly the kind of crisis opportunity Nick’s been pounding the table on lately.
• According to Nick, the world’s biggest economy could start unraveling three days from now…
That’s because Italy’s holding a critical constitutional referendum on Sunday.
If this vote goes the way we expect, Italy’s current prime minster could step down…and a new radical political party could take over Italy’s government.
Like many working-class Italians, this party, known as the Five Star Movement (M5S), blames Italy’s economic struggles on the European Union (EU). If elected, it’s promised to get rid of the euro and bring back the lira, Italy’s old currency.
You might not think this is a huge deal if you’re living outside of Europe. But Sunday’s vote in Italy could trigger something far worse than what we saw after Brexit…which knocked more than $3 trillion from the global market in just two days.
That’s because other European countries could drop the euro too if Italy walks. If that happens, confidence in the euro could plunge…and that’s all a paper currency like the euro has.
• Europe could be on the verge of a full-blown currency collapse…
Most investors aren’t ready for this. But Nick has put his readers in a position to profit before, during, and after this crisis.
One of Nick’s bets against Europe is already up 14% in three months. But his readers could see much bigger gains as early as next Monday.
To see why, watch this presentation we recently put together. It explains everything you need to know about Italy’s upcoming vote…and the potential crisis brewing in Europe.
It also explains how you can access Crisis Investing for 60% off the regular price. Just make sure to act soon. This special offer ends Sunday…the same day Italy holds what could be a potentially historic vote.
Chart of the Day
Italians aren’t the only people fed up with the EU.
Today’s chart comes from a recent study by the Pew Research Center. It shows the percentage of people in different European countries who are dissatisfied with “the EU’s handling of economic issues.”
A few things jump off the screen. One, 68% of Italians are unhappy with the EU. This isn’t exactly surprising. After all, Italy’s economy has shrunk about 8% since 2007. And Italy’s unemployment is close to 12%. Youth unemployment is at an alarming 37%.
Millions of Italians blame the EU for their stagnant economy. And that tells us Italy will likely vote for radical change on Sunday.
Secondly, and perhaps more importantly, the French, Spanish, Swedish, and Dutch are also unhappy with the EU. Like Italy, we think these countries could soon vote for radical change.
If we’re right about this, the EU could soon be history. And that would be very bad news for the euro.
Again, you’ll learn about this potential crisis and how to profit from it by watching our latest presentation. Click here to learn more.
Delray Beach, Florida
December 1, 2016
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