This week’s blog will be short and sweet – a quick run-down of the three most important stories I’m seeing out there in the oil world, and what I think it means for oil markets and oil stocks.
No great analysis needs to be made to understand this piece on Saudi Arabia’s intentions in the oil market. There’s been some speculation that somehow this production tightening from Saudi Arabia has been a planned but insincere maneuver. One piece I saw last week has the ‘master plan’ for the Saudis making only marginal drops in oil production and pushes on compliance in order to keep oil prices lower. These lower prices are intended to continue to squeeze US shale producers back into the dust. The argument is that if the Saudis were REALLY serious about propping prices, they would move to unilaterally curb their own production by a million barrels a day or more.
Well this story shows the seriousness of Saudi intentions: Stick with the plan, retain more of their own oil domestically, again cut exports to the US to the bone and wait.
US oil companies are starting to report 2nd quarter earnings – here’s the one from Anadarko Petroleum and the latest from Conoco-Philips. They both show what I can only describe as a ‘double dip’ capex disaster for US oil producers.
Oil companies drastically reduced spending in 2015 and 2016, on average as much as 70%. But 2017 was thought to be a ‘green-light’ year, when oil prices would recover and increased spending and production goals could be relied upon.
So now, these two oil companies are signaling what I think will be the rest of US producers’ plan – again slash capex to the bone to survive another year, or perhaps two, of cratered oil prices.
For us as long-term investors, that means an even more intense oil supply shortage is somewhere out there, if presently unseeable on the horizon.
And the outlook being advanced by almost every analyst of flat oil prices as far as the eye can see is just wrong.
All this being the case, there’s a definite need to find oil stock ideas where we can place some long-term investments that in my mind have the potential to multiply 3, 4 – maybe even 6 or 7-fold.
This is precisely what I try to do every other week with my interactive ENERGY WORD webinar.
Won’t you join me? The next one is this Monday July 31st at 4PM. Sign up today!