In Energy

As we head towards the dog days of Summer, we also seem to be headed towards the dog days of Oil.

There seem to be hard caps on where oil can go from here for the time being – certainly on the upside and most probably the downside as well.

And here’s where I’m going to direct you to the most important stories on oil this week:

On the downside, there is the fact that oil stocks are rebalancing. We can see that in two ways, with the domestic chart on oil stockpiles, now nearer to the outside limits of the 5-year average than its been since the oil collapse in 2014:
And, on the global side, and despite the increased production from Libya and Nigeria, we see that in Saudi Arabia, domestic stockpiles are collapsing, as well as the Saudis holding back 600,000 barrels a day more for domestic needs. Now, folks, that’s a lot of oil that’s getting used (albeit temporarily probably) by the Saudis that’s not hitting the global marketplace right now.

So, think on that.

On the upside, the potential for recovery is limited as well, mostly by two physical ceilings – First, there’s the huge continuing overhang of drilled but uncompleted wells (DUCs) that already have sunk costs attached and will be put on line as soon as the crude price makes them profitable – and there’s nothing that oil company CEO’s will do to be responsible in overloading a glutted crude oil market on that score – they’ve got to get those sunk costs back WHENEVER they can. Also, there is the continued lack of financial hedging that’s been done on projected 2018 production – well below where we were even at this point last year. That’s selling that will also hit the market like a hammer, should oil reach much above $50.

Finally, for us as investors, I give you the BIG READ:

This link on profitable investing contains the most important matrix from superfund investor Howard Marks:

In a nutshell, you can either be investing with the crowd or contrarian, and either right or wrong. That makes four outcomes and only ONE MAKES YOU BIG MONEY – being right and contrarian at the same time.

Think on that.  It’s the most important investment tidbit I’ve seen in years – and completely true.

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