Some Good Advice - Nov 15

[dan_s]

By Goehring & Rozencwajg Team, November 15, 2018

Intro

Oil and oil-related equities collapsed this week, in what can only be described as extreme panic selling. WTI prices have fallen 30% since October 3rd, erasing all of the gains of the last twelve months. Brent prices have fallen 26% to reach the lowest levels since March. In our many years of writing, we have never issued an “Interim Special Report” but given the severity of the bearishness we felt it was appropriate.
Our models tell us that the market action over the past week has provided truly long-term contrarian investors with the potential buying opportunity of a lifetime.

In today’s brief report, we would like to explain:
•Why we believe oil prices have been weak.
•Where the sell-off has left us today.
•How we think the fundamentals will change over the next twelve months.

It has been a very frustrating time, but the opportunity offered today is extreme, and all of our readers must properly understand the underlying supply and demand dynamics in order to properly decide how to proceed.

[dan_s]

"Energy-related investments today represent the best value we have seen in over twenty years. Despite the steady improvement in fundamentals and oil prices, the relative valuation of energy stocks vs. the S&P 500 is now at an all-time low. The recent events in OPEC (perhaps exaggerated by fund liquidation as mentioned above) have all come together to create nearly unprecedented value. We have often said that we are contrarian investors that like to get involved in markets where investor sentiment is negative and yet fundamentals have turned positive. After the recent sell off, the energy related markets today offer the best value we have seen in nearly twenty years (if not ever)."

If you want to see the Special Report from the Goehring & Rozencwajg Team, dated November 15, 2018 send me an email (dmsteffens@comcast.net)

MY TAKE remains that the "Right Price" for WTI oil is $65 to $75. Today we have a temporary small surplus of oil in the global market. It will not last. Also, the U.S. natural gas market is "short gas" heading into a COLD winter. I have never seen a more short-term bullish situation for gas and NGL prices will also benefit from a cold winter.