Vol. 71 - CRUDE OIL'S RISE

Dear Member,

Is it morally acceptable to invest in a company which is extracting oil from a poverty stricken third world country? In many cases the process is leaving serious environmental problems behind. Are the environmental affects now too severe or detrimental for us to continue using fossil fuels as our number one method of energy?

Pinnacle Digest is not here to judge or discredit anyone making money in the markets, but these questions have been hampering many companies' and investors' profits. Our focus is on the timeline of this oil run and how investors can prepare themselves to benefit today and tomorrow in the oil and gas industry.

The current run up in the price of oil should act as a steady reminder of how essential this commodity is to our existence. Crude oil's rise in value over the past decade is staggering.

Consider this. Friday June the 6th's gain of over $10 dollars was more than the entire price of crude oil in December of 1998 when it traded at just $10.72 per barrel. The next time someone tells you inflation is not that severe, you have something to respond with. Oil touched an all time record of $139.12 on the 6th of June before closing at $138.02.

Why is oil up over 100% in a year?

• Reports are showing that Asia is taking an unprecedented share of exports from the Middle East.
• Domestic production from the United States is simply not cutting it and is at a low.
• The US dollar has been crippled and the unemployment rate in the United States is 5.5%.
• Oil is clearly being bought and used as a hedge against inflation.

The markets have been reacting very positively to oil's massive run up. The TSX Composite moved up a whopping 2% on Thursday and is now up 8.5% on the year. Oil moved up $5 on Thursday which was enough to send energy shares 3.5% higher; their largest increase since June of 2006. Exxon shares soared to their highest price since March while Encana Energy rose 3.6% to finish at $92.43 Thursday and $92.60 Friday. Oil and energy resource stocks are leading many indexes higher and breathing life into a very worrisome marketplace.

Morgan Stanley has recently reported that oil prices may hit $150 per barrel within the month.

On Friday June 6, Senate Republicans blocked a global warming bill that would've required major reductions in greenhouse gases, delaying a debate over the world's biggest environmental concern until next year for a new congress and president. It was reported that the Senate debate focused on a very harsh disagreement over the expected economic costs of putting a price on carbon dioxide, the leading greenhouse gas that comes from burning fossil fuels. Opponents argued this would lead to higher energy costs.

You have to be very critical and very timely when investing in the oil and gas industry. Our team continues to stand behind junior oil and gas producers. North America must look to domestic production and as an investor you must look for low cost producers. The oil and gas industry is in a battle between competing companies, countries and environmentalists and the business is not getting easier. Our team believes oil will settle at the $110 per barrel mark within a few months, but record quarterly profits will be achieved by most oil companies producing this year.

While we are on the topic of Oil and Gas we want to share a very impressive accomplishment achieved by one of the members in the Pinnacle community. You may remember a debate we had in our Weekly Volume dated May 10, 2008. The topic was "Which is the best small-cap oil and gas equity to buy in 2008?" Pinnacle member "tara" won the debate with the selection of Yangarra Resources (YAN:TSXV). tara explained the pros and cons of the company in a very detailed breakdown. At the time tara wrote the response, Yangarra Resources was trading at $0.20. On Friday the company closed at $0.36, up 80% in only four weeks. Great work tara and thank you to all the members who emailed us notifying our team of this impressive win.

As a collective group let's decipher through the bad investments and find the next great undiscovered equity. Let's find the bottom feeders, the dark horses, the next big trend and most importantly, let's do it together.

All the best with your investments,

PinnacleDigest.com

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