Even the Saudis Can't Control This Oil Rally

The life of a prince isn’t easy. If you don’t watch your back, you could get caught in a purge and end up in jail…

Saudi Arabia’s “anti-corruption” purge continues this week as Crown Prince Mohammed bin Salman has arrested more businessmen and royal ministers. Well-known billionaire investor Prince Alwaleed bin Talal is the most recognizable name caught up the purge so far.

Alwaleed is one of the richest men in the world. His very own Kingdom Holding fund has stakes in Citigroup, Twitter, and Apple. He’s appeared on financial TV here in the U.S. on several occasions to talk about his investments and the markets. As CNBC notes, the arrest of Alwaleed is the equivalent of the FBI rounding up Warren Buffett and Bill Gates and sending them to the pen.

No one knows how this consolidation of power will play out for the royal family. But the financial media is full of speculation over what it means for the markets. Crude jumped 3.5% on Monday to its highest levels since 2015 — and the talking heads were quick to blame the purge for the sudden jump.

But you know better than that.

We’ve tracked the energy sector’s comeback move since it first gained traction in September. Since then, we’ve seen the Energy Select Sector SPDR (NYSE:XLE) go from the market’s biggest loser to top-comeback contender. Thanks to this week’s push, XLE is now up 15% from its August lows. Meanwhile, light crude is up another $10 since September…

I seriously doubt the oil market had any insider information regarding the Saudi purge. The media can talk about how the energy rally is a result of the situation in Riyadh, dwindling U.S. rig counts, OPEC bickering, or a dozen other political or economic factors. Frankly, none of it means squat. The fuse on this energy rally was lit long before the news broke.

In fact, the new oil bull is well underway. And while the days of $100 oil are long gone (and probably won’t be back anytime soon), there are still plenty of opportunities to cash in double-digit gains in the energy sector before the new year.

You’re already way out in front of the herd as energy stocks play catch-up with the price of oil. We’ve maintained a position in the Energy Select Sector SPDR since September. This position is already well in the green.

Energy stocks have broken free of an eight-month skid to finally take on a leadership role. The media is beginning to take note and new narratives are now in place. Now it’s up to us to capitalize on this fledgling trend.

This week’s strong performance is already helping the sector get its mojo back after consolidating its gains in October. Look for more of these oil and gas names to streak higher into the holidays…

Sincerely,

Greg Guenthner
for The Daily Reckoning

The Daily Reckoning