• 4 minutes Will We Ever See 100$+ OIL?
  • 8 minutes Iran downs US drone. No military response . . Just Destroy their economy. Can Senator Kerry be tried for aiding enemy ?
  • 11 minutes Energy Outlook for Renewables. Pie in the sky or real?
  • 4 hours Iran Loses $130,000,000 Oil Revenue Every Day They Continue Their Games . . . .Opportunity Lost . . . Will Never Get It Back. . . . . LOL .
  • 18 hours Shale Oil will it self destruct?
  • 1 day Berkeley becomes first U.S. city to ban natural gas in new homes
  • 1 day Iran Captures British Tanker sailing through Straits of Hormuz
  • 11 hours Renewables provided only about 4% of total global energy needs in 2018
  • 2 hours EIA Reports Are Fraudulent : EIA Is Conspiring With Trump To Keep Oil Prices Low
  • 2 days Drone For Drone = War: What is next in the U.S. - Iran the Gulf Episode
  • 2 days Today in Energy
  • 15 hours Oil Rises After Iran Says It Seized Foreign Tanker In Gulf
  • 3 days Mnuchin Says No Change To U.S. Dollar Policy ‘As of Now’
  • 3 days Populist, But Good: Elizabeth Warren Takes Aim at Private-Equity Funds
  • 2 days LA Solar Power/Storage Contract
  • 2 days Why Natural Gas is Natural
Dan Dicker

Dan Dicker

Dan Dicker is a 25 year veteran of the New York Mercantile Exchange where he traded crude oil, natural gas, unleaded gasoline and heating oil…

More Info

An Energy Investor Roadmap For The Future

Rig

I’ve been writing for O&E insider for nearly 6 years now. For this last column, I think the best thing would be to try to give a roadmap to you as an investor for the future without me, or as near as I can see it.

First, our investment thesis: I believe that the current 4 -year dip in energy prices is not a systemic change in the oil economy, but another cycle of the many I’ve seen in my career in the dynamic shifting of global oil supply, demand and price. In the six years that I’ve been writing here and documenting this latest bust cycle, I’ve perhaps missed somewhat on the timing of the recovery, but not on the inevitability of it.

Now we have global oil prices again touching $80 a barrel (ignoring the differentials here in the U.S. for the moment), with the major predictors of supply and demand showing an acceleration towards prices again going well above the three-digit mark – perhaps as early as the 2nd quarter of 2019.

What could derail that? Obviously, a global recession, of which there are some likely signs showing themselves right now. We must be vigilant in keeping track of those, of course. But more pressing is the trade dispute between the U.S. and China, which has shown little motion towards a resolution. I don’t believe it will remain that way for long though. Already with Mexico, the Trump administration found some small concessions with which to claim victory and is well on its way to restoring a new NAFTA agreement with Canada as well, with few differences to mark.

We need to hope this will be the outcome with China as well. I think it will be.

So, with our thesis on relatively steady ground still, where do we go for investments to take advantage of coming higher oil prices?

I’ve preferred Euro majors for less risky investments, and we’ve done well with names like Total (TOT), continuing to deliver 4-6% dividends and share appreciation to boot. While I’ve correctly advised against the U.S. majors, Exxon-Mobil (XOM) is now so beat up that it too delivers a 4+% dividend, which I’ve never seen before – and their balance sheet still allows massive safety and continuing stock buybacks to come. It’s the one U.S. major I’ll bless right now.

I’ve also, correctly, sent investors to find beta in U.S. independent shale producers – and still see that as the best beta play in the oil patch for the relative long-term. My preference was in Permian producers, but as that infrastructure logjam has gotten worse, I’ve tried to find producers with optionality and not singular acreage in the Permian. One alternative area worth looking at is the DJ Basin, but those players are on hold until after the midterms when the anti-fracking bill in Colorado will be decided. If it is defeated, be prepared to load up on DJ specialists Noble Energy (NBL) and Andarko (APC). Oil services will have its day, but as production will continue to see tremendous growth limitations, your choices there will need to remain nimble – and for right now, I don’t see much to get excited about. Refiners have reaped all the benefits of plentiful, cheap, low sulfur oil for the last two years, and I’ll be the first to admit I missed the power of this move – but also find it difficult to buy them here. Their luck is sure to run out as it always does, when production in the U.S. finally levels off from the rampant growth it’s experienced in the last two years (now nearing 10.7m b/d!!).

In natural gas, we continue to wait for the same kind of clearing of supply that oil’s experiencing, but without export markets, competitive pipelines and the associated extra supply that’s come from increased oil fracking, the natural gas markets still seems to have a longer road ahead. That said, I still believe that natural gas will have its turn again as oil is having now. The stocks themselves are either bargains or traps, dependent on whether the natural gas bust will still be able to bankrupt of few of them before the turnaround, but my canary in the coalmine will remain Chesapeake Energy (CHK) – if they can stay in business, the rest of them should make it to the next gas boom too. Therefore, I have been recommending a small speculative stake in a Marcellus specialist or two to sit on – just to have a nice basis start to a bigger portfolio when gas gets rolling.

Of course, I could talk all day about investment prospects (as I have for 6 years), but that’s about as quick a summation of where I think energy will be headed for the next two years or so. And further than that, no one can even begin to judge. Good luck.




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play