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Two Buy Signals for North America's Greatest PrizeBy
Saturday, September 10, 2011
You didn't hear about it in the mainstream press, but the Canadian oil sands received a big piece of bullish news last week...
The "Canadian oil sands" is a blanket term that refers to North America's largest recoverable oil deposit. It's a 54,000-square-mile swath of oily sand in the Athabasca basin of Alberta. It contains between 1.7 trillion and 2.5 trillion barrels of oil. With today's technology, recoverable reserves stand at 178.6 billion barrels.
That makes it the world's second-largest oil reserve, second to Saudi Arabia. It's also the No. 1 source of U.S. oil imports... which makes it an incredibly valuable asset to investors. Last week's news is an indication this asset is going to get even more valuable...
Currently, there aren't enough pipelines to supply hungry markets in the U.S. and Asia. That lack of pipeline capacity is holding back full-bore oil sands production. But last week, the U.S. State Department gave its approval to the Keystone XL pipeline.
This giant, 1,700-mile pipeline would run from Alberta, across the Great Plains to Houston, Texas. It would double the volume of oil we currently import from Canada to 4 million barrels per day. That's about 44% of U.S. oil imports.
According to the Canadian Energy Research Institute, this new pipeline will create about 342,000 new U.S. jobs by 2015. Approving the pipeline might be the best move we've seen out of Washington D.C. in a decade. The U.S. needs jobs. And it also needs a steady, safe supplier of oil.. Canada has the oil... and it's happy to sell it to us.
The Keystone XL pipeline isn't the only thing that will unlock the oil sands' incredible value.
Several weeks ago, a pipeline firm Enbridge announced it had lined up enough clients to support its Northern Gateway pipeline. This multibillion-dollar pipeline would carry oil west from Alberta oil to ports on Canada's Pacific Coast.
This proposed pipeline would ship 525,000 barrels per day to the coast for transport to Asian oil refiners. This further opens the huge and growing Asian market to Canadian oil.
Those two pipelines will open up over 2.5 million barrels per day of new production... and allow the oil sands region to more than double production in the next decade. This means more profits for major oil sand players like Suncor, Canadian Oil Sands, and Cenovus Energy.
I'm not in a rush to jump into oil stocks right now. A global economic slowdown could depress oil prices. So these companies should just be on a long-term investor's potential buy list... especially now that transport capacity will increase.
Daniel Yergin wrote the definitive history of the oil industry. He called it The Prize, from a geologist's claim many years ago that Middle Eastern oil is "the single greatest prize in all history." The Canadian tar sand deposit is the single greatest "prize" in North America.
It's not under miles of ocean, like many recent oil finds are. It's not in a war zone ruled by maniacs. It's a huge, safe, crude oil deposit... right next to the United States.
And this new infrastructure will make it even more valuable.
Good investing,
Matt Badiali
Further Reading:
"We depend on many importers who are inept, enduring declining production, corrupt, or a mixture of the three," Matt writes. "That's why you need to own a slice of the Canadian oil sands."
The oil sands are the world's largest safe store of crude oil... And they're right next door. Read more here: Why You Should Be Maximum Bullish on the Canadian Oil Sands.
Market NotesCHART OF THE WEEK: GOLD STOCKS AND THEIR "BREAKOUT" Our chart of the week is an update on last week's idea. It shows how gold stocks just registered a clean "breakout."
To recap our recent history with "the golds," we recommended this sector in late 2008 as a great way to play a market rebound. Our expected rebound came... And gold stocks rallied 150% in two years.
Since hitting a high around 600 in late 2010, gold stocks – as measured by the benchmark Gold Bugs Index – have frustrated investors with sideways trading action. But now that gold has gained nearly 50% in the past year, the industry is enjoying a big revenue increase.
As you can see from our chart, this revenue increase has driven gold stocks (which we urged you to buy in June) out of their sideways range and onto a new 52-week high. A new uptrend begins.
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Stat of the week
47%
Percentage of individual income tax returns filed in the U.S. with zero or negative federal income tax liability in 2009, according to the National Tax Foundation. In other words, nearly half of tax filers are "takers" rather than "payers."
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