3 Never-Seen Events That Mean Big Changes For Oil Investing

This past month saw not one, but three first-ever happenings in crude oil markets.

Oil is moving to places it never did before. With new alliances between buyers and sellers signaling some critical structural changes afoot in the market.

Changes that could be telling us where the next big oil investing opportunity is going to be.

Below, we look at what's happening and what it means for the oil industry-and for E&P stocks.

First, the strange events.

These oddities began a month ago. When crude from eastern Canada's offshore White Rose oil field was sold to an unusual market.

India.

The shipment marks the first time that Indian oil consumers have imported White Rose cargos.

This unusual sale was soon followed by another. With crude from Colombia sailing across the Atlantic to buyers in Italy. Again, the first time such a shipment has ever occurred.

If market observers needed any confirmation that something strange is happening in crude markets, they got it last week. When a third history-making oil trade took place.

This time it involved crude sailing across the Pacific. A cargo of Cold Lake heavy oil was loaded at Vancouver, western Canada-then shipped to buyers in Singapore. A distant route never before traveled by this blend.

America Disrupts the Market

So, what gives? Why has the oil market's internal guidance suddenly gone wonky?

The answer it appears, is America's surging oil production.

Crude output in the U.S. is booming. Total liquids production has increased to over 230 million barrels per month, from 150 million less than three years ago.

And that phenomenal growth is showing little sign of abating. Just this week, the U.S. Energy Information Administration reported that crude production from the prolific Bakken play has grown by 26,000 barrels per day, or 2.7%, during the past month alone. Oil production from the Eagle Ford play in Texas likewise grew 2.6% during that period.

All of this new production is re-wiring oil trade routes in the Americas.

Crude is now piling up in the U.S. Gulf Coast refining zone. Evidenced by falling prices for Gulf blends like Louisiana Light Sweet, which has dropped over $6 against Brent over the last month.

Growing U.S. production isn't just affecting domestic energy markets. This flood of oil is also altering trade flows in other countries.

Especially Canada.

That's because Canada is the only country where U.S. oil producers can legally export crude.

Given this bottleneck, American oil firms have been pushing out as much crude as possible to Canadian buyers. U.S. exports to Canada have surged by 70% over the last three years.

Which has left Canadian domestic oil production looking for a home.

Faced with rising competition from American oil, Canadian producers are looking to new markets to pick up the slack.

Particularly for Canadian east coast blends like White Rose. These fields have limited pipeline infrastructure for takeaway. So sailing crude overseas is looking like the best option these days.

Even if it means sailing as far as India.

The fact that western Canadian crudes like Cold Lake are also being diverted to overseas exports shows just how crowded the North American market is becoming. There's plenty of pipeline takeaway from Alberta to other parts of the continent. But there just isn't space on the line.... or buyers on the other end.

Colombian oil sailing to Europe is another symptom of the same problem. America used to be the go-to market for Colombia's oil. But these days, U.S. consumers don't need the imports. Forcing Colombian producers to look further afield for buyers.

What Does This Mean For Investors?

All of these changes point to one critical conclusion: international oil prices are today running significantly higher than North American prices. An incentive that's drawing oil out of the woodwork into new parts of the world.

Which means that oil investors need to be looking to international E&Ps. Companies positioned to access better pricing abroad-and return higher profits over the coming months.

There are a number of locales that might fit the bill.

Australian E&Ps are cheap right now relative to their global peers.

Although Australia's crude output is relatively small, there is more than enough production from basins like the Bowen and Surat to build a successful junior E&P.

Especially given that Aussie crude blends here are linked to Malaysia's Tapis crude-a blend that sells at a premium even to high-priced Brent oil. Tapis oil currently goes for $117 per barrel.

As I've discussed in the past, one great way to play this space is through royalty companies like Chelsea Oil and Gas (OTC: COGLF). The firm holds royalties or direct rights over 12 million acres across Australia. Next to big firms like Statoil and Total, who are planning to drill play-proving wells adjacent to Chelsea's acreage during the coming year.

Another strong international market is Southeast Asia. Evidenced by the recent buy-out of area E&P Coastal Energy (TSX: CEN) by the Abu Dhabi government.

Good crude pricing for blends like Tapis give a tailwind to exploration here. This is also beneficial for explorers in nearby nations like Thailand.

Another spot to watch in this region is Myanmar. Which just last month held its first-ever offshore bid round-attracting major firms like Shell, ExxonMobil and Total.

High prices for light oil blends internationally could also be a driver for development in places like the Mediterranean.

Just look at the production Bankers Petroleum (TSX: BNK) has put together in Albania.

Today, Bankers is producing over 18,500 barrels per day from its Patos-Marinza field. And receiving Brent-linked pricing for this output.

Elevated revenues, along with generally lower valuations today for international E&Ps might make producers in farther-flung parts of the world the go-to play for investors the next while. Time to follow the oil tankers, and set sail for more distant lands.