Oil prices are going up, not down
Hi everybody,
It has been a rather good month for oil stocks and oil prices, contrary to the doom of many forecasters and former permabulls who capitulated near the lows. That doesn’t surprise NCP as we wrote on NCP a modest bull case for oil on August 10th. Simply put: it was hard to be bearish when everybody was maximum bearish. So far, that philosophy has worked out quite well and energy is performing decent. Despite WTI trading around $64 tonight after a small rally, NCP does not see any reason to pivot. Most people remain bearish and it is hard to find a bullish party on crude over the coming few months as almost everybody is expected ‘large’ builds. While NCP is not explicitly bullish, it remains difficult to be overtly bearish when the consensus view is largely bearish and most of the negative catalysts for oil have played out or are at least in the process of being exhausted. Going forward, it seems likely that oil price will be trading more off legitimate fundamentals then market manipulated which may not be a positive for the crude bears over even the medium term for several reasons.
In this article, I wanted to reflect on some positives for energy prices and why the bear case may not be playing out as expected.
US associated shale gas falling, lateral feet completed is collapsing
IEA revises capex trend upward significantly, projects demand to grow into 2050
OPEC testing limits on spare capacity, members may not be able to fulfill limits
Carney abolishes EV mandate, an increasingly common trend globally
Rate cut cycle about to intensify, dollar weakness is expected
Trump is running out of cards to lower oil prices
