Something has to give. The price of WTI is $57/bbl this morning and all indications are that supply/demand is tightening, so the oil price should go higher. Yet we see high quality upstream company stocks still trading near 52-week lows. Why?
Wall Street needs a "Paradigm Shift".
Fund managers are reluctant to move money into upstream companies because FEAR still persists.
> Surging U.S. shale oil production will keep the market over-supplied
> OPEC disunity
> Electric cars will reduce oil demand
None of these fears are real because demand for oil is relentless and today's oil price is not even close to what is needed to fund the supply growth that is necessary to meet future demand.
Read this: https://www.linkedin.com/feed/update/ur ... 5265294337
When is the best time to buy oil stocks?
When is the best time to buy oil stocks?
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: When is the best time to buy oil stocks?
Did you know that ....
Electric car sales globally are about 850,000 per year and oil demand is growing by at least 1,500,000Bbl/d this year.
Since every 1,000,000 electric cars that replace gasoline/diesel cars only reduces oil demand by 14,000Bbl/d (0.014%) and the existing fleet of gasoline/diesel burning cars is growing by about 20,000,000 per year it is likely going to take a few decades before we hit peak demand growth at which point US shale will have been exhausted and the cost curve will be significantly higher than today’s oil price. At that point oil demand will be ~ 120,000,000Bbl/d and the annual decline rate will amount to 5,000,000 Bbl/d of lost production per annum = ~ 2 Permians/year).
U.S. Tight Oil production CANNOT meet future oil demand. As the percentage of U.S. oil production from shale increases the annual depletion rate also increases. It will take more and more horizontal wells each year just to hold production flat and in just a few years it will be impossible for the U.S. to increase production from tight formations anymore.
Electric car sales globally are about 850,000 per year and oil demand is growing by at least 1,500,000Bbl/d this year.
Since every 1,000,000 electric cars that replace gasoline/diesel cars only reduces oil demand by 14,000Bbl/d (0.014%) and the existing fleet of gasoline/diesel burning cars is growing by about 20,000,000 per year it is likely going to take a few decades before we hit peak demand growth at which point US shale will have been exhausted and the cost curve will be significantly higher than today’s oil price. At that point oil demand will be ~ 120,000,000Bbl/d and the annual decline rate will amount to 5,000,000 Bbl/d of lost production per annum = ~ 2 Permians/year).
U.S. Tight Oil production CANNOT meet future oil demand. As the percentage of U.S. oil production from shale increases the annual depletion rate also increases. It will take more and more horizontal wells each year just to hold production flat and in just a few years it will be impossible for the U.S. to increase production from tight formations anymore.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: When is the best time to buy oil stocks?
"We continue to believe that the complete and utter level of despondency towards the energy sector is creating an epic opportunity. While we have no visibility on when the “sentiment turn” will occur we are at least no longer having to wait for the “fundamental turn” to happen. All it will take for energy stocks to get materially rerated is a collective realization of the current reality. We continue to believe that the oil market could rebalance by ~May 2018. The focus on the pending inventory builds in Q1’18 are known and understood…the mistake that is being made is that the oil price will move NOT on the absolute rising level of inventories due to seasonality but rather on the inventory balance differential vs. last year and the 5 year average."
Eric Nuttall
Senior Portfolio Manager
Sprott Energy Fund
Eric Nuttall
Senior Portfolio Manager
Sprott Energy Fund
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group