An Oil and Commodity Bottom
Ken Gerbino is one of my favorite authors. He’s written an important piece recently about how the spread between the demand for oil and the production is narrow and getting narrower.
In the book I wrote recently that you can find on Amazon called Nobody Knows Anything, I keep trying to make the point that markets go up and they go down. They get far too optimistic then they go far too negative.
In an interview I did with The Gold Report back in February I commented on the price of oil at $26 a barrel being just as irrational as it was at $120 a barrel. Oil went from $26 a barrel to $44 a barrel in the next six weeks. Don’t let anyone try to convince you that any market is only supposed to move in one direction. Markets go both ways and they get as irrational at bottoms as they do at tops.
Oil and the rest of the commodity world hit a bottom around the end of January. In real dollar terms commodities were the cheapest they have ever been in history. In the book I do say to look for those sorts of markets. While everyone was moaning and groaning about how much lower oil and commodities were going to go, the markets turned and did what they always do. Bear markets breed bull markets. The worse the bear, the bigger the bull. You can certainly see it in a chart of the price of gold over the last three months. I’ve never seen any market rocket that much higher that fast.
When oil hit $26 a barrel in February it took 48 barrels of oil to buy one ounce of gold. That’s a higher ratio than it was during the Great Depression. So I was comfortable in early February saying we had seen a bottom in gold and I’m just as comfortable now saying we have seen a similar bottom in oil and commodities months ago. The surprises from here will be to the upside. I’m not saying there won’t be corrections. I’d like to see a barn burning correction in gold just to rattle the cages of all the guys who believe gold is supposed to go up every single day. It’s not. It’s a market and it goes up, it goes down.
Ken makes the valid point in his piece that the difference between supply and demand right now is actually pretty small. And we know that shale wells decline 80% in the first two years. Lots of those wells have been capped over the last year or so never to be reopened. And there isn’t much funding of shale oil wells at present. US production is going to decline a lot faster than anyone is saying at present. When that decline takes place, the price of oil is going to surprise on the upside.
I talked about the Titan Process by Titan Oil Recovery in a piece I wrote in early February. If you didn’t read it, you should. I don’t think I really need to cover every point again. The Titan Process will recover a lot of the oil left in the ground in conventional wells. It has the potential to totally change the financial dynamics of the oil industry. Titan is doing something totally new. The SEC now allows companies to advertise private placements. But only to accredited investors and before you get to talk to a company, you have to provide written proof that you do qualify as an accredited investor.
Titan wants to raise up to $25 million with a minimum of $6.5 million to buy existing oil fields that would work with the Titan Process. Since the average increase in increased oil production in the hundreds of wells they have tested so far is above 92%, buying an oil field now makes a lot of sense. If I am right about oil going much higher sooner than anyone expects, an investor now could reap a double reward, part from the increase in oil production and part from the price of oil going higher.
If you are an accredited investor and have a potential interest in the Titan Process, you should contact Ken Gerbino, the Chairman of the Board at: email@example.com
Or phone him at (310) 281-0015
I do own Titan shares so I am hardly a disinterested party. Feel free to go to their site and review it for yourself.