Things are starting to get very interesting indeed in the oil markets.
We’ve been coasting along in the last several weeks, having enjoyed a terrific turnaround in oil stocks, accelerated by the two major storms in Texas and Florida.
And we’ve been watching with interest (and a bit of a smile) as day by day, more and more analysts have been seeing the logic of a long-term renaissance in oil prices that I saw coming weeks ago.
In my last blog letter, I noted there was a new bullish tone that Ed Morse of Citibank and Evan Calio of Morgan Stanley were writing into their client notes.
Since then, we’ve also seen a very positive note on oil from Goldman Sachs, who only two weeks ago thought that the Harvey and Irma storms were going to kill demand and therefore be bearish for oil instead. Oops.
Goldman has been joined by the head commodity analyst for S+P/Dow Jones – who sees $80 oil on the horizon. (If you’ve been following me, you know I think she’s being grossly conservative).
Super trader Trafigura is also now ready to abandon the “lower for longer” meme for the current oil market. That’s pretty significant.
We’ve also seen a note from Moody’s, indicating that shale oil companies can make no further progress at $50 oil – and will need higher prices for any significant further increase in production – something I’ve been saying as well for months. Look at this move from Anadarko, now more concerned with cash flow than production increases, and you’ll see how this will become a major, very significant trend with the mini-majors for the rest of 2017 and into 2018. This trend makes the production projections of the EIA for 2018 truly laughable.
Meanwhile, oil’s been taking a break from its recent strong rally – for two reasons I can see:
First is the resuscitated dollar, seemingly coming back from the dead in the last week or so:
Second is the always quick on the draw hedge funders, who have been fast at turning positions around from being short and are adding long positions in the futures markets, particularly in distillate products, where a coming supply shortage seems all but inevitable this winter.
So, what do we do with the energy markets right now?
Well, I’ve got some ideas. But you’ll have to come to my interactive webinar to see precisely what they are – scheduled for this Monday, October 9th at 4 PM. You don’t want to miss it.
The opportunities that are emerging in this market are very specific – and generational.
Translation: buying the right stocks at the right prices will pay off really well.