2022 presents to us as energy investors in a bi-polar way – there were two divergent opposing views on energy on display in the first weeks of 2022, by two very well-regarded bank analysts on commodities and specifically oil. I give you:
(Sorry for the drama – but this contrast is so stark, it deserves some theater)
On one side is Ed Morse, commodities guru for Citibank, signaling that oil is caught up in a short-term supply and inflation issue, much like the rest of the commodity complex. He sees production catching up and far outstripping demand within the next quarter or two, and predicts oil prices will end 2022 far lower than they are now.
On the other is Jeff Currie, commodity expert for Goldman Sachs, who appeared last week to proclaim that oil was in the beginning stages of a multi-year ‘super spike’ – a term full of portent for those of us who witnessed the last Jeff Currie predicted super spike in 2007, when oil reached nearly $150 a barrel.
So – who’s right?
On Ed Morse’s side, there is the recent lowering of prices from the Saudis, implying they think the latest increase in futures markets is more technically than fundamentally driven. He cites the massive debt that OPEC+ members have shouldered in 2021, indicating they’ll be all too willing to pump up production at every opportunity to cover the cash-flow those debts will require. He notes the global shift towards renewables and ESG investing, and the pressures from environmentally sensitive Western governments to make oil companies unprofitable and fossil fuels ‘obsolete’. He also believes that the structural roadblocks to increasing production in Libya, Iran, Iraq and even here in the US are going to moderate and slowly disappear in the coming 6 months.
Sounds like a reasonable case, doesn’t it? Well, hang on a second.
On the other side is Jeff Currie, who cites that global demand for oil, despite environmentalists’ fervent dreams, is not moderating at all; yet he also has seen the number of suppliers of fossil fuels sharply decrease in the last several years – both from particularly European oil majors and US shale oil independents. He cites the lack of exploration capex decimating future supply, and the ability of only Saudi Arabia and the UAE to currently increase supply. He notes the ‘on paper’ increases that OPEC+ has made of 400k barrels a month since November 2021, but sees that OPEC+ has not been able to provide those increases in December and January, and look likely to fall short again in February. Besides these systemic supply chain problems in oil that look to only be getting worse, he cites some very cryptic cyclical indicators about our current inflationary trends that he believes sustain themselves for years, particularly in commodities and other hard assets.
I’ll admit, when Currie starts to talk about long-term cyclical economic indicators, even I have no idea what he’s talking about.
BUT – he IS the guy who seems able to judge when oil is about to go parabolic – he’s done it famously once before.
If you’re invested in energy, or you’re considering getting more invested in energy (whether that’s renewables or fossil fuels), you’ve got to figure out for yourself who’s argument makes the most sense to you, Ed Morse’s or Jeff Currie’s.
One thing that seems almost impossible is for oil and gas to have a calm and flat 2022 – and there’s money to be made in figuring out which one of these heavyweight commodity experts has the coming year more right than the other.
You probably know where I stand. If anything, I’ve even MORE bullish on oil and gas in 2022 than Jeff Currie. I do not see the capability of global oil and gas producers to magically increase supplies after the decimation they’ve received since 2016 – no matter HOW HIGH oil prices get. I also don’t see demand doing anything but increasing quickly with global economies finally ready to re-emerge after nearly two years of Covid-19 slowdowns.
But I bring you these two differing viewpoints from two very respected oil analysts for another, more selfish reason:
It’s truly one thing to figure out which way you think oil and gas prices are going. That’s the argument of heavyweights like Currie and Morse. It’s a different thing ENTIRELY to figure out how to profit from it – where and how to invest and what to look for before, during and after the trade.
That’s what I do. I find the stocks and other hard asset investments that can take full advantage of the moves in oil and gas prices. I tell you the pros and cons of those trades, the pitfalls and the possibilities. I don’t give you short-term pie-in-the-sky dream trades for plungers who are hoping to make 3 or 4 or 5 times their money – I give medium to long term trades that consistently generate strong 15-25% alpha, not only from the gains that the stock prices might give you, but through options, dividends and other special distributions.
And I’ve been doing it for 35 years.
If you think Jeff Currie might be correctly viewing oil and gas, in the way he correctly called it in 2006, you might also consider joining me at the Energy Word – and get in on what I think will be an historic 2022 for oil and gas profits (and some renewable ideas too!).
Click here to find out more and sign up.
