The United States has become a net exporter of oil.

Pick yourself up off the floor. It’s true—at least by one definition of “oil.” And the change will have major effects on U.S. economic growth and on what you should hold in your portfolio.

Let’s start by nailing down exactly what I mean by oil.

The U.S. is not about to become a net exporter of crude.

In September the United States exported a whopping 35,000 barrels a day of unrefined crude oil. That same month the U.S. imported 9 million barrels of crude oil a day. If you look just at crude, the U.S. is the same huge importer of oil that it’s been for as long as most of us can remember.

But if you look at the figures for refined petroleum products, the picture is shockingly different. In September the United States exported 3.2 million barrels of refined petroleum products a day and imported just 2.2 million barrels a day. That’s roughly a surplus of exports over imports of a million barrels a day. For the first nine months of 2011, according to the U.S. Energy Information Agency, the U.S. exported 752 million barrels of refined petroleum products—gasoline, jet fuel, kerosene, and such chemical industry feed stocks as ethylene, butane, and propylene.

The swing in less than a decade is immense. In 2005, for example, the U.S. imported 900 million barrels of refined petroleum products more than it exported.

This huge shift doesn’t have just one cause. Read more

In June Australia’s BHP Billiton (BHP) bought U.S. tight shale oil and gas producer Petrohawk. In July China’s CNOOC (833.HK) bought Canadian oil sands producer Opti Canada. This week Norway’s Statoil (STO in New York or STL.NO in Oslo) bid to acquire U.S. oil shale producer Brigham Exploration (BEXP).

See a pattern here?

Global oil companies and oil consuming countries are looking past the current soft demand for oil created by today’s global economic slowdown and today’s lower oil prices. They see a future of rising demand and rising energy prices—and of limited opportunities for adding to reserves and production. They also see an opportunity created by today’s lower oil prices and oil producer share prices to buy reserves and exploration opportunities. And these global oil producers and oil consuming countries are moving aggressively to seize that opportunity.

Oh, and let’s not forget that money is cheap right now (if you’re a global oil producer, that is). Many of these offers are all cash deals that are buying shares of the acquired companies at depressed prices.

My question to you is What are you doing about seizing this opportunity for your portfolio? Let me give you a few suggestions in this post. Read more

The drop in oil prices is starting to make oil stocks interesting

Oil prices have taken a 1-2-3 punch over the last three days—which is starting to make oil stocks interesting to me.

Why? Because the big punches–surveys of supply and forecasts of demand from the U.S. Energy Information Agency and the International Energy Agency, respectively–are backward looking. They reflect lower demand because of higher oil prices that peaked (for the moment) at $113.39 a barrel of benchmark West Texas crude on April 29 and at $126.64 a barrel for benchmark Brent crude on May 2. Since then oil prices have tumbled to today’s $98.95 a barrel for West Texas crude and $113.16 for Brent crude. That’s enough to lead to upward tweaks going forward in those demand forecasts—and the tweaks could graduate to revisions if oil falls further in the current commodities rout.

The third punch, hearings in Congress on cutting the U.S. oil industry’s $21 billion in tax breaks as part of any budget deal, grab headlines and allow politicians to posture for constituents, but the effects of this kind of political circus are almost always short-term.

Here’s a blow by blow of the first two punches. Read more

Will Saudi Arabia, Kuwait, and other Middle East oil producers go the way of Indonesia? Reporters for Reuters Breakingviews (www.breakingviews.com) asked yesterday April 21.

Indonesia, which had exported 1.2 million barrels of oil a day in 1980, became a new oil importer in 2004. The reason? Huge domestic subsidies had made oil so cheap that Indonesians had tripled their domestic consumption.

That seems to be what’s happening in Saudi Arabia and Kuwait now, Reuters reported. In Saudi Arabia oil consumption has climbed by 50% in the last decade to an estimated 2.7 million barrels a day. Saudi Aramco, the national oil company, projects that demand could hit 8.3 million barrels a day by 2030.

In 2010 Saudi Arabia exported 7.5 million barrels of oil a day. Add in estimated spare capacity of 2.8 million barrels a day. And then to the very scary math: If Saudi consumption rises to 8.3 million barrels a day, the country will consume almost all of the 10.3 million barrels a day it has in exports and spare capacity.

Where’s all this consumption growth coming from? Read more

On January 28, I argued that the U.S. economy is still in the early recovery stage of the business cycle, and that you should overweight your portfolio toward the stocks that do best at this point in the cycle: “Sectors that do best are usually industrials, near the beginning of the stage; basic materials; and, near the end, energy.”

 The next stage for the U.S. economy is late recovery. “Sectors that have done well in this stage include energy and, near the end of the stage, consumer staples and services.” (For more on investing for the economic cycle see my post http://jubakpicks.com/2011/01/28/where-the-heck-are-we-in-the-economic-cycle-anyway-the-answer-is-important-in-deciding-what-sectors-to-overweight/ )

See any sector that those two stages have in common? So why not overweight energy right now? several readers asked. That way your portfolio can catch the sector’s outperformance at the end of the early recovery stage and the sector’s outperformance in the first part of the late recovery stage.

That’s an excellent idea. Just be careful what energy stock you pick. The sector is a little tricky to navigate right now. I’d favor being very selective on oil stocks—most of the international majors aren’t all that attractive currently. I’d favor oil equipment and service companies right now and small oil producers that are growing production and that look like acquisition candidates over the oil majors.

And I’m going to end this post with five picks of exactly those sorts. Read more