They call them "Cycles" for a reason
Posted: Wed Nov 01, 2017 5:20 pm
I have been in the upstream oil & gas business for almost 40 years, counting the 3.5 years I spent in public accounting (1976 to 1979). Most of the clients that I worked on were upstream companies and oilfield services firms. I worked for Arthur Anderson in Tulsa. My first assignment was Helmerich & Payne (HP), still a world class outfit.
I have lived through six SIGNIFICANT oil price cycles. Here is what happens each time. This cycle is no different except that demand growth is much stronger today.
1. Only a few people saw the crash coming.
2. A lot of companies went bankrupt, but the surviving companies were much stronger.
3. The market balanced sending oil prices went higher, which is where we are today.
The low for this cycle was set in Q1 2016 when WTI had a double bottom around $26/bbl. The price of WTI has doubled since then and will probably double again.
Why? Because demand now exceeds supply by over a million barrels per day and the U.S. tight oil plays cannot meet future demand growth. This is a very capital intensive business and $50 oil or even $60 oil is not high enough to develop the future supplies humans are going to need. I don't think OPEC can bail us out this time.
The signs of the next oil shortage are clear as day and very soon the Wall Street Gang will figure it out. Several already have.
Our Sweet 16 are in much better shape today than they were at the beginning of 2017. I expect First Call's price targets for the Sweet 16 to move a lot higher as the Wall Street Gang digests Q3 results and adjusts the commodity prices they are using in their models.
I have lived through six SIGNIFICANT oil price cycles. Here is what happens each time. This cycle is no different except that demand growth is much stronger today.
1. Only a few people saw the crash coming.
2. A lot of companies went bankrupt, but the surviving companies were much stronger.
3. The market balanced sending oil prices went higher, which is where we are today.
The low for this cycle was set in Q1 2016 when WTI had a double bottom around $26/bbl. The price of WTI has doubled since then and will probably double again.
Why? Because demand now exceeds supply by over a million barrels per day and the U.S. tight oil plays cannot meet future demand growth. This is a very capital intensive business and $50 oil or even $60 oil is not high enough to develop the future supplies humans are going to need. I don't think OPEC can bail us out this time.
The signs of the next oil shortage are clear as day and very soon the Wall Street Gang will figure it out. Several already have.
Our Sweet 16 are in much better shape today than they were at the beginning of 2017. I expect First Call's price targets for the Sweet 16 to move a lot higher as the Wall Street Gang digests Q3 results and adjusts the commodity prices they are using in their models.