Domestic Oil Stockpiles Surge to Record 13-Year High by johnjordan576


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									  Domestic Oil Stockpiles Surge to Record
                13-Year High

                          Energy is not really the place to be if you’re a buyer in this
                          stock market. Oil prices and oil stocks are very vulnerable in the
                          upcoming U.S. recession, and while there are some individual
                          oil stocks that I do like right now, the group isn’t going
                          anywhere in this market. U.S. stockpiles of oil are growing fast,
                          as domestic production is now at a 13-year high. Natural gas is
                          plentiful, and demand is low, so the whole energy picture isn’t
                          looking good.

Combine very low to no economic growth, and you’ve got $90.00 or less World Texas
Intermediate (WTI) oil. What we’re getting from the economic news and financial results
this earnings season is a general, across-the-board slowdown in the U.S., Europe, and
emerging markets. The only way oil prices and oil stocks can advance in an environment
like this is if there’s a new war. It doesn’t mean peak oil doesn’t exist, but low oil prices
reveal economic stagnation in the world’s mature economies.

Consumers should benefit with lower oil prices and so should some specific industries.
For example, if diesel prices go down and you’re a railroad company, all of a sudden the
cost to ship your freight is going down. Just like with gold stocks, oil stocks can’t really
advance when the underlying commodity isn’t following suit.

As always, there are some growth stories out there. It doesn’t mean I’d buy them, but
institutional investors might if the news is good enough. Kodiak Oil & Gas Corp.
(NYSE/KOG) is a growth story in the energy sector. It’s one of only several oil stocks
that have generated excellent returns over the past three years.

Currently trading around $8.00 a share, this oil and gas producer has its operations
concentrated in the Williston Basin of North Dakota and Montana, and the Green River
Basin of Wyoming and Colorado.
                         Chart courtesy of

In its second quarter of 2012, Kodiak reported average sales volumes of 12,696 barrels of
oil equivalent per day (BOEPD). It is a growth story because this represents an increase
of about 385% over sales volume of 2,618 BOEPD in the second quarter of 2011, and a
20% increase over first-quarter 2012 sales volume of 10,578 BOEPD. As I say, there’s
always a growth story out there in any industry, but I wouldn’t be buying much in the
energy sector with the economic picture that’s being painted right now.

Spot oil prices are one of the best near-term gauges on global investor sentiment. Higher
oil prices means things are looking up. Today, oil prices are saying that mature
economies are in stagnation and emerging markets are slowing. I do like a few oil stocks
in this market right now, but I’m certainly not expecting a lot from them with oil prices in
the tank.

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