Venture: Oil and Gas
Issue 40;
The oil price has been sliding, and many believe it is because the economy faces a slump. Yet demand is at an all-time high while inventories have been run down, and the US strategic reserve has collapsed to balance the 2022 supply shock from the war in Ukraine. While the supply and demand may be in balance, there is little room for manoeuvre should there be another shock.
Oil Inventories Are Too Low
In addition, investor interest in oil futures has collapsed below the 2014 and 2020 levels, the last time oil collapsed. Contrarians should take note.
Oil Investors Have Given Up
Not only is oil investor sentiment poor, but oil seems to have been monetised in recent months, moving in sync with US treasury yields. There has always been a link because high yields imply robust economic growth and vice versa. But this heightened level of correlation is ridiculous because oil is a product of the real world, and the chances of another lockdown seem remote.
UK Oil: The Ultimate Contrarian Trade
Oil stocks have come under pressure, especially the mid-cap exploration companies in the North Sea. But the fact remains that we need oil, and the value is compelling.
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