The most compelling news of the week in the energy world was the International Energy Agency’s (IEA) mid-term report, calling for a ‘supply shock’ from North America’s increasing oil supply.
For those of us in the daily trading game, these ‘revelations’ are hardly that, we’ve been well aware of the hyperbolic growth of supply from tight oil in the US from the Eagle Ford, the Bakken and elsewhere, the growing supply from Canadian oil sands in the Athabasca, and the new and stunning deepwater finds in the Gulf of Mexico.
So, it has been hard to translate those IEA findings into a trade that is truly ‘new’ – Bakken shares in quality E+P’s like Continental (CLR) and EOG resources (EOG) have been strong and levitating quite nicely already, as have Canadian shares of Suncor (SU) and Marcellus plays like Cabot oil and gas (COG) and EQT resources (EQT).
What I’d like to find going forward is the stock that hasn’t yet benefited from this supply shock here in the US, not necessarily from the increased supply, but in fact from the decreasing supply in Europe and perhaps a long-term arbitrage that is being created.
Perhaps I’ve found it in the refining space.
Here in the US, crude oil is not legal for export, yet refined products are. With an increasing supply of crude coming on line and a demand profile unable to soak up the increase of refined…