Note from RBC Capital Markets - Jan 17

[dan_s]

I have a very high level of respect for the energy sector team at RBC Capital.

" We remain constructive and see asymmetric upside risk to
the oil complex this year. Much of the conviction to our constructive tilt is geared
toward 2H’23 with China’s re-opening as a major driver underpinning that view.
That said, we see slight global stock builds this quarter, and the uninspiring state of
the physical market (Fig 1) corroborates that view. Likewise for the contango that
is plaguing major benchmarks. The conversations that we’ve had with investors so
far this year, ranging from equity generalists to energy specialists to commodity
traders, is largely bullish, and we share this sentiment (we see WTI averaging in
the mid-$80’s in 1H’23). We see 2023 as a grind higher rather than gap higher type
of market. However, the first couple of weeks of this year have suggested to us
that a disconnect exists (for now) between the headline driven sentiment (mostly
centered on China’s re-opening) and what the physical market and term structure
are telling us."