Some quick takes on the energy markets for my newsletter subscribers, in no particular order:
1 – I was on Yahoo Finance this AM, and one question I received was about the shortfall on production that OPEC is reporting. Last month, they missed their production targets by a whopping 2.6 million barrels a day – an incredible supply miss.
Jared Blikre asked me whether this ‘miss’ from OPEC has been on purpose or not.
Well……
Like US producers, many OPEC+ members are reeling from a lack of asset development since the Pandemic began and have been short of capital to restore that exploration/development part of E+P since – and although they have promised increases of 400k barrels a day since December of 2021, they’ve missed by that much or more since then – leaving a 2+m barrel a day hole today.
But they are also – again like US producers – not particularly keen to increase production here either, enjoying some obviously massive returns currently with oil hovering near $110 a barrel. They’ve suffered through 6 years of below par returns prior to 2021, and clearly aren’t eager to step on their own success.
So, are they doing this on purpose or are they merely unable to respond to the supply shortage??
My answer is yes.
2 – Oil and the stock market at large is at odds with each other today.
Oil has been going up since the start of the year, stocks, particularly tech, have been going down.
Recession fears are morphing into real-time slowing growth, with retail and housing cratering along with discretionary spending elsewhere.
And while oil won’t be left unscathed as growth slows, it can provide some very good market protection opportunities in a slowing economy.
Let’s be clear and simple – folks are going to have to start choosing between the latest iPhone and buying gas to drive their kids to school.
It’s rare that oil and gas (along with consumer staples and banks) are the safe ports in a recessionary storm, but today, for lots of further reasons I can’t cover in this quick update, I think they are going to be some of the best investments you can put your money into. The best ones will give you a trifecta of returns – steadily rising stock prices, healthy dividends and some nice options opportunities to supercharge both.
That’s all for today.
