$80 Oil is in Sight

When he's right, he's right.

Yesterday, Christian DeHaemer laid out one of the best cases for why you should be tapping into the oil sector right now.

It's simple, really.

As my cubicle cellmate pointed out, the fundamentals are too good to ignore. It's only a matter of time before global crude demand tops 100 million barrels per day, and that psychological benchmark could come as early as 2019.

If nothing else, the supply/demand balance alone should give you a reason start looking into oil stocks.

Yet there's more to this story than most investors truly understand.

You see, even though the fundamentals are bullish, they aren't the only thing that can push oil prices higher.

In fact, there are several catalysts lined up right now that could send oil straight past $80 per barrel.

And one of them has already been triggered...

Oil's Road to $80

Things don't get much worse than the state of Venezuela's oil industry. As one of the founding members of OPEC, it's a shame how things turned out.

To say it's on the verge of collapse isn't hyperbole, either.

A recent report suggested that 90% of Venezuela's hard currency is obtained through oil exports. You don't need me to tell you how bad things are going to get when oil production collapses.

In 2016, the country's oil output fell by 12%; last year it dropped by another 13%.

Make no mistake, dear reader: the end is within sight.

Over the last decade, PDVSA's oil output has been propped up by the Chinese, who have been investing tens of billions to keep Venezuela's oil flowing. As it stands now, up to 600,000 bbls per day is taken right off the top and shipped to China to pay off the interest on its debts.

I have a feeling the Chinese are fully aware that their investment is a lost cause. Do you really think Chinese banks will continue burning that cash?

Last month, Venezuela's oil production plummeted by another 100,000 barrels per day.

Tick-tock.

Don't get me wrong, the loss of heavy Venezuelan crude on the global market isn't going to send crude into the triple digits overnight like it would have a decade ago.

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It is, however, a perfect storm for U.S. exports.

If I had told you back in 2007 that the United States would be exporting more than 2.5 million barrels of oil per day, I probably would've been laughed out of the room.

The loss of Venezuelan crude from the global market is a huge catalyst for U.S. tight oil and prevents that delicate supply/demand balance from being upset.

The bears have been thrown into the backseat as fears of a trade war between China and the U.S. diminish.

That's good news for U.S. oil drillers, especially given the fact that China is the third-largest importer of U.S. oil.

Chinese President Xi's promise to lower import tariffs and open the economy sent crude soaring. As I write this now, crude has already rallied to nearly $66 per barrel.

And then we have the geopolitical mess in the Middle East...

Pushing aside the fact that both OPEC and Russia are showing record compliance to the previously agreed-upon production cuts, the escalating threat is being wholly underestimated right now.

Again, if this situation occurred a decade ago, we'd see oil climb to $100 practically overnight.

The most recent chemical attack in Syria is just one event that could trigger a nightmarish situation, with Israel immediately taking action.

Think of the dominoes that are lined up right now. The United States is weighing its options, with a looming strike still very likely against a Russian-backed Assad. Rumor has it that even the Saudis may take action.

Those three countries account for over 30 million barrels of oil per day of global supply.

I'll let you picture the scenario of what could happen if two of those superpowers go head to head.

Things could get really ugly from here.

Until next time,

Keith Kohl

@KeithKohl1 on Twitter

A trueinsider in the energy markets, Keith is one of few financialreporters to have visited the Alberta oil sands. His research has helpedthousands of investors capitalize from the rapidly changing face ofenergy. Keith connects with hundreds of thousands of readers as theManaging Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, theHaynesville Shale, and the Marcellus natural gas formations - all ahead of the mainstream media. For more onKeith, go to his editor's page.