The time has come for an end of the year trading round-up – how we did with actual trades and what we can learn for our energy sector trading in 2016 and beyond. What immediately strikes me from the last year of trading is how deadly accurate I was with the macro energy environment starting in early March through December, yet how that refused to translate into what should have been a banner trading year.
We’ve got to figure out why.
Well, let’s look at the macro ideas I was using, and the trades that followed.
My book, Shale Boom, Shale Bust was mostly completed in early 2015 although came for sale in June and the macro outlook for oil and oil stocks expressed there turned out to be dead on the mark – I predicted a three stage progression of the oil bust, with protracted, low oil prices that don’t even begin to recover until 2Q16 at the earliest. I foresaw the coming distress and bankruptcies of the marginal U.S. producers, the collapse in capex and share price of the survivors and still believe that it will take a real and large production collapse to end the current bust.
With that thesis in mind, let’s look at what I did.
Early in the year, I took advantage of a continuing production glut and dropping price to trade some of the refiners, making some gains – but abandoned the group when I thought they had gotten too pricey and WTI/Brent spreads began to collapse. While I booked profits, there was more…