The chorus has become deafening: The International Energy Agency (IEA) has predicted a full ‘rebalancing’ of the oil market by late 2017, with OPEC joining in on that timetable Thursday. Our own Energy Information Agency (EIA) has gone even more aggressive, expecting a cross of the global supply/demand lines later this year and agreeing with the timeline that I laid out in my book more than a year ago.
The markets, as always an ‘anticipatory’ instrument, are responding by ratcheting up the prices of oil stocks, sometimes to levels that corresponded to oil trading more than $15 higher than current levels: EOG Resources (EOG) is near $80, Devon (DVN) at $35, Hess (HES) above $60 – all prices seen in late November/early December of 2015, when oil was hovering nearer to $60 a barrel.
As happy as I could be to see (some perhaps) premature profits on many of my long-term oil positions, I’m also wary: It is entirely clear to me that our oil stocks are getting out too far on their skis too soon, and even though I believe that oil could easily run towards $50 a barrel without taking a break, I don’t believe the oil stocks should or will react more positively to an even more extended $5 a barrel rally.
Some analysts are seeing it similarly, even if they were late to this ‘energy renaissance’ ‘sector rollover’ ‘short covering’ party – or whatever name you’d like to put on it. Deutsche…