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.|
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.
|< Prev||Next >|
Current Headlines - Finance
Indiana governor plans to 'clarify' religious objections law
Police: Body found 3 days after NYC blast
Body found at New York City building explosion site: NY1
NEW YORK (Reuters) - A body was found on Sunday at the site of a gas explosion that destroyed four New York City apartment buildings and injured 19 people, NY1 local television reported. The body was recovered at about 1 p.m. local time in the rubble caused by the blast and fire in Manhattan's East Village neighborhood on Thursday. (Reporting by Laila Kearney; Editing by Cynthia Johnston)
Stocks likely to drift as investors await Fed, earnings
By Caroline Valetkevitch NEW YORK (Reuters) - Wall Street investors may find little reason to make big moves next week as they await monthly U.S. jobs data and any news that could chang...
Indiana governor defends religious freedom law
By Alina Selyukh WASHINGTON (Reuters) - Indiana Governor Mike Pence on Sunday defended a new state law that opponents worry may support discrimination against gay people, saying he had no plans to add extra protections but would consider new suggestions from state legislators. Pence, speaking on ABC's "This Week," sought to counter criticism from protesters who have spilled onto the streets of Indianapolis and others, including some corporations, after signing the Religious Freedom Restoration Act on Thursday. "It does not apply to disputes between individuals, unless government action is involved." Supporters say the law, which was passed overwhelmingly by the Republican-led state legislature, will keep the government from forcing business owners to act against their strongly held religious beliefs. The Indiana law has drawn criticisms from companies such as Angie's List Inc and Wal-Mart Stores Inc , tech industry chiefs including openly gay Apple Inc CEO Tim Cook, and the White House.
PM: 'Dangerous accord' with Iran worse than Israel feared
Israeli Prime Minister Benjamin Netanyahu on Sunday denounced as "dangerous" a nuclear accord that world powers are negotiating with Iran, saying it goes beyond what his government had feared. "The dangerous accord which is being negotiated in Lausanne (Switzerland) confirms our concerns and even worse," Netanyahu said in remarks at a meeting of his cabinet broadcast on public radio. The premier warned that Iran could be in a position to "conquer" the Middle East through what he called the "axis" of control it has over the capitals of Iraq, Lebanon and Syria. Netanyahu angered the White House when he addressed a joint session of the Congress to warn against a nuclear deal with Iran in the lead-up to Israel's March 17 general election.
TAKE A LOOK-Saudi Arabia to open stock market to foreigners
Saudi Arabia's Capital Market Authority has announced it will open the stockmarket to direct investment by foreign institutions in the first half of 2015. Click on the links below to see some stories and analysis. NEW>Saudi navy evacuates diplomats as Houthis close on Aden >Oil dives 5 pct as Iran supply worry trumps Yemen >Saudi Arabia decides to restore ambassador to Sweden >SAFCO says new urea plant start-up delayed until mid-May >MIDEAST STOCKS-Gulf ends well off lows after Yemen panic >Saudi drawing down FX reserves to cover deficit >February bank lending up 11. ...
Subdued quarterly earnings likely to weigh heavy on equities markets
"With F&O (future and options) expiry (which happens on the third Friday of every month) and a short working week with just three working days and one day without clearing, the expectation is that the markets are going to be trading in a very narrow range," Geojit BNP Paribas vice president Gaurang Shah told IANS. The Indian markets will remain closed on April 2-3 on account of Mahavir Jayanti and Good Friday. According to Shah, post the five-to six percent correction on the index which had earlier witnessed lifetime highs, the downside would be very much limited and the recovery thereafter will be slow and shallow with a huge amount of time spent in consolidation. Further action on the fiscal or monetary front, if any, can give some upside to the market," Dipen Shah, head of private client group research at Kotak Securities, told IANS.
Intel in talks to buy Altera, shares of firms surge
Intel Corp is in talks to buy fellow chipmaker Altera Corp in a deal likely to top $10 billion, according to a source familiar with the matter, making it Intel's biggest purchase ever and the latest merger in the quickly consolidating semiconductor sector. The acquisition of Altera, which makes programmable chips widely used in cellphone towers, the military and other industrial applications, would underscore Intel Chief Executive Officer Brian Krzanich's determination to expand into new markets as the personal computer industry loses steam. Earlier this month, Intel slashed nearly $1 billion from its first-quarter revenue forecast to $12.8 billion, plus or minus $300 million, as small businesses put off upgrading their personal computers. Shares of Altera shot up about 28 percent after the talks were first reported by the Wall Street Journal, closing at $44.39 per share on the Nasdaq.
Former Yahoo CFO on Pao trial: Most women I know, including me, face sexism at work