From a fundamental view, it probably couldn't get worse for oil. Stockpiles have added 33 million barrels in the last 8 weekly reports, prices are hovering at $40 and momentum alone could cause a test of the previous lows near $38. Production hasn't slowed one ounce in the last year in the US, and 3rd quarter reports from the E+P's remain optimistic on growth for 2016.
So, why the hell am I recommending Hess (HES) at $58 a share?
I'll tell you why. Markets are all I know and all I've needed to know for the past 30 years. I can read and understand all of the numbers and forecasts that the analysts are famous for, and I can use them and quote them – but my insight comes from reading the 'tea leaves' of market action, what I based my living on for the past three decades.
And the market is telling me it doesn't get significantly worse for oil – and now's the time to buy.
How can I say that?
Have a look at oil prices. I've already told you how oil is bounded on the downside – not by fundamentals but by the financial players that are trading it. Futures markets, which set oil prices, can be simplified into two types of players using them: Commercial participants, with real physical positions in oil; and noncommercial players, who bet on prices as a financial tool for investment or diversification. Few, if any, commercial players have any interest in selling oil below $40; with their breakeven prices, hedges down there only serve to…