Energy Prospectus

I have finished updating all of the Sweet 16 Growth Portfolio individual company forecast/valuation models, raising the forecast assumptions for higher natural gas and NGL prices. You can view them on the EPG website or download them to Excel. I am now updating the Small-Cap Grow Portfolio models.

Susan & I are heading over to Mississippi tomorrow and we won't be home until Sunday afternoon, so I have updated the main Sweet 16 spreadsheet that shows my up-to-the-minute valuations for each company in the portfolio compared to First Call's price target. It will be posted to the EPG website home page this evening and you can view it on the website or download it to Excel.

Since the closing prices on Sept 17 to the closing prices on Sept 22 the Sweet 16 gained 1.23%, primary due to the snap back in the oil price today thanks to EIA 's bullish storage report on Wednesday morning. U.S. and OECD petroleum inventories keep falling and they are way below normal for this time of year. Natural gas, propane and home heating fuels are all low with not enough time to build them to safe levels before winter begins. The situation in Europe is much worse.

If we have a cold December, we may see a bidding war for home heating fuels that will set records.

During the last three trading days the S&P 500 Index declined by 0.99%, but is still up 17.03% YTD. Pullbacks are normal during Sept/Oct, but there is a lot of "noise" out there with lots of it coming from the idiots in Washington, DC. Inflation is usually good for stocks and we are going to see a lot of inflation if that $3.5 Trillion spending bill passes.

I will be working tomorrow morning, but I wanted to get the updated spreadsheet posted tonight.

I will be posting several updated forecast/valuation models for our Small-Caps tomorrow.

Note from Jesse Felder, a really smart guy.

Is Oil About To Breakout Of Its Long-Term Downtrend?
September 22, 2021

There is a compelling case to be made for favoring value stocks today. Among those, the energy sector remains the most compelling by a long shot. In addition to being cheap, it’s really the only sector within the broad market where insiders continue to be very bullish (the broad market, in contrast, continues to be sold by the smartest of the smart money). So it would appear that insiders believe oil prices are likely to breakout above critical resistance represented by the upper trend line of its long-term downtrend channel.

It’s also very encouraging to see commercial hedgers in crude oil futures actually cover their short positions (or hedge less) as oil prices rise. This is fairly unusual. Just by glancing at the chart below, it’s apparent that hedgers typically add to shorts (hedge more of their production) when prices rise and vice versa. The fact that they are actually adding exposure as prices have risen over the past year or so would appear to be a signal that they, too, are betting on a breakout higher in oil prices.

As Paul Tudor Jones has said, “When you get a range expansion, the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion.” Such a breakout of a trend that dates back over a decade then would represent an important sign post in terms of the direction of not only the broader commodity sector but also inflation, as energy prices are a very important input for both. For these reasons this chart, as well as the activity of those most closely tied to it, is worth keeping a close eye on.
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As I have been telling you for months in my weekly podcasts, the OECD inventories steadily falling is going to eventually lead to much higher oil prices. Why? The OECD countries are the "Consumers of oil". Their economies depend on a steady supply of energy and for at least another decade the primary source of that energy will be oil. Within nine months OECD inventories will be less than 27 days of supply and OPEC+ spare capacity will be gone. If this comes to pass, WTI oil will need to go over $100/bbl and the industry will need to complete a heck of a lot more wells than are being completed today.