We Made 110% on Oil. Here’s Why We Just Sold. – Fat Tail Daily

Hopefully, you took the advice from your Mining Memo updates and made the most of cheap oil and gas stocks.

As you know, we’ve been big on this value theme over the last 6 months.

But if you took advantage, well done. Not many have.

Your anxiety is probably much lower than the bulk of investors who chased maturing bull markets like US tech or ASX financials.

By the way, traditional energy stocks have been a core focus for my paid readership group, and for the most part, that’s played out well.

In my mind, the outcome was clear: we’re sitting in the middle of a major commodity-wide upswing.

Until recently, oil and gas had not participated in the upward turn… The tide that lifts all boats.

Buy, hold and wait for the inevitable spark to drive prices high. That was our strategy for investing in the traditional energy market.

And thanks to events in the Middle East, we’ve now been vindicated. Our contrarian recommendations proved correct.

So, what’s our NEXT move?

Here’s the problem: if you have leveraged into oil and gas positions, at some point, you do need to think about crystallising paper profits into real gains.

And the only way to do that is to sell some or all of your holdings.

Last Monday, that’s what we did for our premium group, issuing our first sell alert in the oil and gas market.

This is what I said:

….the time has come to take part profits on one of our strong O&G performers; Horizon Oil [ASX: HZN].

This has been a great little performer for us, now up over 110%, thanks to the recent oil crisis in the Middle East.

This trade has done exactly what we asked of it: a hedge against geopolitical risk. As you might recall, we bought this company when no one was interested in traditional energy.

We continue to reap the rewards of doing the exact opposite of the herd.

On top of our recent triple-digit wins with Fireweed Metals [TSX-V: FWZ] and Eldorado Gold [TSX-V: ELD], you should be sitting on a significant pile of cash by now.

That puts us in an excellent position to pick up some heavily sold-down miners….

You might have your own views on where the oil and gas market is headed.

For now, conditions appear dire, with no end in sight for the Middle East crisis.

So, why the heck are we taking profits?

Shouldn’t investors be leveraging up their exposure?

Well, think about this way…

Human ingenuity has a tendency to overcome adversity. And in my mind this oil crisis will be no different.

One example: Saudi Arabia.

As the world’s largest crude exporter, this Middle Eastern nation is perhaps the key element in stabilising the global oil market.

Yet, its importance has barely been noticed amidst a tidal wave of panic headline reporting.

But Saudi Arabia has a ready-made backup plan…

It’s known as the East‑West crude oil pipeline, which allows oil to transit via the Red Sea. It’s operated by Saudi Aramco, one of the world’s largest companies.

According to Al Jazeera, over January and February, an average of 770,000bpd (barrels per day) flowed through this East-West pipeline.

But that’s just a fraction of the 5.5 million bpd Saudi Arabia exported through the Strait, prior to the crisis.

So, how can the pipeline help?

Well, here’s the kicker, something that could explain why markets are starting to discount the war in Iran…

Sources indicate that Saudi Arabia’s East-West oil pipeline has a maximum capacity of about 7 million barrels per day.

In other words, a capacity to offset most, if not all, of Saudi Arabia’s oil flow disrupted by the war in Iran.

Add in other alternative supply routes like the UAE’s Abu Dhabi Crude Oil Pipeline and the Iraq-Turkiye Crude Oil Pipeline, and the impact of the Straits closure diminishes.

Now, couple that with some demand destruction, say flight and holiday cancellations, plus higher oil flows from Russia, and the crisis starts to look far less severe, even if the war in Iran continues.

See what I mean, panic can turn to calm quickly, thanks to humans’ in-built capacity to solve problems.

But what about the Houthis?

If you’re not familiar, the Houthis are an Iranian-backed Yemeni armed movement that controls most of Yemen’s population.

They oppose US and Israeli influence and have disrupted global shipping through Red Sea attacks since 2023.

Yet, that hasn’t stopped Saudi Aramco from increasing tanker loadings via its overland pipeline.

So for now, oil flows are gradually finding alternative routes.

And as the war in Iran continues, these back-up options are likely to become more permanent, diminishing Hormuz’s role in global trade.

Bottom Line

The time to buy oil stocks was back in 2025. That’s when no one was interested in this sector.

No doubt, new opportunities will emerge for oil and gas, but this could be for other reasons, which I’ve explained in past editions, here.

But right now, I’ve got my eye on different opportunities in the resource market.

If you want to be part of that and potentially recreate our successful trades on the oil and gas market, you can join my premium readership group here.

This is your front-row seat to gaining an advantage in the market, backed by real recommendations that deliver REAL gains.

Until next time.