The Bull Case For Oil
This is oil YTD, folks. Absolutely destroyed.
It’s hard not to buy some at these levels. Let me elaborate on the bull case.
WTI futures were at record contango just 2 days ago. Previous extremes have marked major bottoms.
Oil-to-S&P 500 is forming a historic double bottom. Prior low was December 1998 and oil went up 240% in the next 22 months.
Oil vs. its 200-day moving average:
Now as distorted as it was in the depth of the global financial crisis and bottom of the 1985-6 crash.
Energy high-yield credit spreads just reached record levels with WTI prices at 18-year lows.
An incredibly bullish setup.
Energy service stocks are truly at historic low valuations. The overall industry now trades at 0.35x annual revenues! Plenty value to be found.
The commodities-to-equity ratio is at a 50-year low.
One of our core positions still is:
Long gold & short stocks.
Oil and energy stocks have big asymmetric upside here and makes sense as part of the long mix.
Senior Analyst at ICRA (Chemicals, Oil & Gas, Shipping and logistics) | Ex-Citi | CA | CS | CFA L3 Cleared |
4 年Thanks for sharing the information Sir! What I personally opine is that it depends on the upcoming opec meeting scheduled tomorrow on whether Russia along with USA and Saudi adhere to a production cut of 10-15 mbpd to equate the demand and supply equation for oil. Although since US shale oil cost of production is at about 40-45$ such low prices of crude at this point would be worst for USA and it faces tough competition. USA would take extreme measures maybe politically or economically to ensure that oil reaches back in the range of 40-45$
Purdue University Global Cybersecurity Mgmt Graduate Student | IC2 CC, MCSE, MCSA, MCP, A+ | All opinions are my own
4 年It all comes down to ONE WORD. Polymers. That and Trump stopped oil production to try and make it go back up while everyone isn't supposed to be going ANYWHERE. "We will summarize: 1) the data supporting proofreading during CoV replication; 2) the possibility of a multi-protein fidelity complex, using E. coli DNA polymerase III as a conceptual framework; and 3) the promise of genetic and therapeutic interference with fidelity regulation as an approach for attenuation and treatment of CoVs." https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3857799/
Specialist in: Sales & Client Services.
4 年Screaming BUY ??