Activist investor Carl Icahn is optimistic about the oil industry, expecting it to recover from the effects of the coronavirus pandemic, but not very quickly.
Investors should have patience, he said at an event as quoted by Reuters, and they shouldn’t rush to buy energy shares right now.
The activist investor, however, warned that he expected more bankruptcies in the energy sector, although he added, jokingly, that people who don’t buy now may be sorry a few years from now given energy company valuations.
Bankruptcies in the U.S. oil patch over the first eight months of this year were 62 percent higher than the respective period of 2019 and more are on the way as companies struggle to stay afloat in a persistently low oil price environment. Hope is scarce as the coronavirus continues infecting tens of thousands on a daily basis.
“Without any near-term horizon hope for improving economic conditions for U.S. producers, it is reasonable to expect that a substantial number of producers will continue to seek protection from creditors in bankruptcy before this year is over,” Haynes and Boone said in their latest bankruptcy report.
The outlook for oil demand remains gloomy, despite pickup in economic activity in many markets. Supply also remains excessive despite forecasts that the oil market is about to swing into a deficit before long. Traders have so far shunned these forecasts mostly, with prices remaining stuck at around $40. Even a statement from OPEC this week that the worst was now over for oil did not help: it only spurred a short pick-up in prices before they slumped back down again.
At the time of writing, however, prices were on the rise again thanks to production outages in Norway and the United States.
Global oil inventories remain at more than 200 million barrels above the five-year average and there is now more oil flowing into international markets after the lifting of the Libyan oil terminal blockade.
By Irina Slav for Oilprice.com
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