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  Saturday, February 13, 2016  Home > Money > Finance > Investment > Put Rising Gas Prices to Work for You!
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Put Rising Gas Prices to Work for You!

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As I look back on the first quarter of 2012, one of the most glaring events was the rise in gas prices here in the U.S. Wholesale gasoline began the year at $2.66/gallon on the NYMEX, and closed last Friday at $3.33, a gain of 67 cents ... a jaw-dropping 25 percent.

The reasons for the increased gas prices are varied. Generally speaking, though, they've risen because oil prices have risen. I know that might sound obvious. But I'm not talking about the oil prices we follow in the U.S., which is known as West Texas Intermediate (WTI).

Instead, I'm talking about what has replaced WTI as the global benchmark of oil: Brent crude.

Brent crude rose from $109/barrel (bbl) to over $125/bbl in the first quarter on reduced supply coming out of the Middle East and on concern regarding potential military conflict between Israel and Iran.

In addition to the general rise in oil prices, we have seen a widening of the difference, or spread, between WTI and Brent crude prices. That spread has increased from about $9 at the beginning of the year to over $19 as of Monday morning. And this has created a very unique opportunity for refining companies in the central U.S.

You see, those refiners have the ability to buy crude oil at the WTI price, then refine it and sell gasoline based on the Brent crude price ... which is over $120/bbl.

These market dynamics have occurred because of global unrest in the Middle East — not because oil company executives are greedy. So when the media, or anyone else, tries to vilify them, don't believe it. The truth is prices are just reacting to the market in which they exist.

Now the reason there is such a large spread between WTI crude and Brent crude is mainly because the WTI crude we produce here in the Baaken Shale and middle of the country is "trapped" since there are very few pipelines that can transport it to the Gulf of Mexico for export.

But That Will Be Changing ...

Companies dedicated to moving oil across the U.S.  then on to foreign ports are sure to prosper from the additional flow.
Companies dedicated to moving oil across the U.S. then on to foreign ports are sure to prosper from the additional flow.

The integral Seaway Pipeline, which carries crude oil from the Gulf of Mexico to Cushing, Oklahoma, is going to be reversed. It will then carry oil from Cushing, Oklahoma to the Gulf of Mexico to be exported. In addition, other pipeline companies have discussed switching the direction of their pipelines to help relive the glut of WTI crude oil sitting in the U.S.

One potential way you could profit from this trend is by purchasing shares in master limited partnerships (MLPs) that make money as crude oil is transferred through their pipelines. Additionally, oil tanker companies will benefit from this increased export as well.

Two ways to play that:

First, is the Alerian MLP ETF (AMLP), which owns shares in infrastructure-related MLPs.

And the second, to a lesser extent, is the Claymore/Delta Global Shipping ETF (SEA), which owns shares in a tanker companies.

As a savvy contrarian investor, you must constantly be searching for opportunities in unique events. Indeed, the very wide WTI/Brent spread is one of those events. And as that spread narrows, there will potentially be multiple opportunities to profit with MLPs and tanker companies, which could leave you smiling the next time you fill up.

Source: moneyandmarkets.com


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Current Headlines - Finance

  • Oil prices soar on report that UAE offers talks on output cuts 12 Feb 2016 | 6:45 pm

    NEW YORK: Oil prices soared Friday, with US crude rebounding from a 2003 low, on reports that OPEC was willing to organize output cuts that could ease the global oversupply. US benchmark West Texas Intermediate for March delivery shot up USD3.23 (12.3 percent) to USD29.44 a barrel on the New York Mercantile Exchange. A big catalyst was a Wall Street Journal report that United Arab Emirates oil minister Suhail Al Mazrouei had said the OPEC cartel was willing to cooperate with other producers on trimming crude output.

  • Wall Street rallies; S&P 500 snaps five-day losing streak 12 Feb 2016 | 4:21 pm

    Traders work on the floor of the NYSE"Europe was strong and especially the banks in Europe, and that appeared to have some positive carryover effect on sentiment towards banking and other financial stocks here in the U.S.," said John Carey, portfolio manager at Pioneer Investment Management in Boston, which has about $220 billion in assets under management. Also helping boost sentiment, he said, was that U.S. consumer spending regained some strength in January. The Dow Jones industrial average closed up 313.66 points, or 2 percent, to 15,973.84, the S&P 500 had gained 35.7 points, or 1.95 percent, to 1,864.78 and the Nasdaq Composite had added 70.68 points, or 1.66 percent, to 4,337.51.


  • Oil rockets from 12-year low on renewed talk of OPEC cut 12 Feb 2016 | 2:38 pm

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  • Wall Street Weekahead - Late-day buying could be start of turnaround 12 Feb 2016 | 2:31 pm

    A Wall Street sign is seen in Lower Manhattan in New YorkBy Chuck Mikolajczak NEW YORK (Reuters) - As U.S. stocks continue to struggle in 2016, equities are showing some signs selling pressure may be reaching an end. The S&P 500 is down about 13 percent from its record high in May, as oil remains mired below $30 a barrel, while concerns about stability among banks and uncertainty about the U.S. Federal Reserve's path of rate hikes have pushed investors away from risk assets. Jack Ablin, chief investment officer at BMO Private Bank in Chicago, views that as a positive sign.


  • Gold heads for best week in four years on safe-haven appeal 12 Feb 2016 | 2:23 pm

    File photo of an employee arranging gold jewellery in the counter as her arm is reflected in the mirror at a gold shop in WuhanBy Susan Fenton LONDON (Reuters) - Gold eased on Friday after soaring 4 percent the previous day, but was still set for its best week in four years, lifted by stock market turmoil that has sent investors rushing for safe haven assets. Spot gold was down 1 percent at $1,234.30 an ounce by 1423 GMT, but has still risen more than 5 percent this week, the biggest weekly gain since October 2011. The precious metal has benefited, along with bonds and the Japanese yen , from a rush to safety as investors worry about the health of some banks, financial instability and the potential for global recession.


  • U.S. sources: Russia forging alliance with Taliban 12 Feb 2016 | 2:10 pm

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  • Two teen girls found shot dead at school in Phoenix suburb 12 Feb 2016 | 1:43 pm

    Two 15-year-old girls died on Friday in a shooting at a high school in the Phoenix suburb of Glendale and were found with a gun beside them, police said. Glendale police spokeswoman Tracey Breeden said it was too early to determine if the incident at Independence High involved a suicide.

  • Obama’s budget request comes amid sexual assault investigation backlog 12 Feb 2016 | 12:41 pm

    Over the past decade or so, the DOE's Office of Civil Rights, which is tasked with enforcing laws against discrimination of all kinds in educational programs, including Title IX, has watched its workload double while it’s resources have remained the same.

  • Auschwitz survivors testify at former SS sergeant's trial 12 Feb 2016 | 8:18 am

    DETMOLD, Germany (AP) — Three Holocaust survivors testified Friday about the horrors they experienced at the Auschwitz the death camp, on the second day of the trial of a former SS sergeant on 170,000 counts of accessory to murder.

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