• 4 minutes Energy Armageddon
  • 6 minutes How Far Have We Really Gotten With Alternative Energy
  • 10 minutes Russia Says Europe Will Struggle To Replace Its Oil Products
  • 3 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 22 mins Reality catching up with EV forecasts
  • 2 days "Natural Gas Price Fundamental Daily Forecast – Grinding Toward Summer Highs Despite Huge Short Interest" by James Hyerczyk & REUTERS on NatGas
  • 12 days US Oil Independence is a myth and will always be a myth
  • 1 day A Somewhat Realistic View of the Near Future for Electric Vehicles Worldwide
  • 7 days The Federal Reserve and Money...Aspects which are not widely known
  • 16 days Natural gas price to spike when USA is out of the market
  • 12 days Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in
  • 15 days "Biden Is Running U.S. Energy Security Into The Ground" by Irina Slav
  • 15 days *****5 STARS - "The Markets are Rigged" by The Corbett Report
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

Premium Content

Are Oil Stocks Stagnating?

The news in the energy markets is very intense indeed – although for an oil stock investor, nothing seems to matter much – but more on that later. First, the news.

 There was a turnover in the U.S. Secretary of State. Former Exxon CEO Rex Tillerson is out, and CIA chief Mike Pompeo is in. Tillerson was no big fan of the Iran nuclear deal, but Pompeo is even less committed to it, calling the 2015 agreement ‘a disaster’. The deal is set to be “reviewed” by the Trump administration on May 12th.

If that review results in the tearing up of the Iran agreement, it would force the reapplication of sanctions and would likely change the future oil output from Iran. Even more importantly, sanctions could alter the Iranian commitment to the Saudi-led OPEC production deal. Besides the Russians, the Iranians have been the most difficult cartel member to keep in the fold of OPEC production guidelines.

So, the move of Tillerson out of the State Department could mean a lot for global oil supplies.

Here in the U.S. we recently finished with CeraWeek, and heard some interesting points of view from various oil voices. To me, the most interesting was Mark Papa’s opinion that the EIA is being overly enthusiastic in their current projections for increased U.S. shale oil production.

ADVERTISEMENT

Besides Harold Hamm of Continental Resources, Papa is the last king of shale left in the game. But despite his stellar reputation for predicting oil markets and the trajectory of shale while with EOG Resources, you still have to wonder why he’s come out of his guarded offices to dispute everyone else's view of shale’s future. Related: The Billion Dollar Bet On European Coal

But we do know this: Everything having to do with investing in oil and oil stocks circles around the prospects for U.S. shale production over the next few years – so getting this prediction right is absolutely crucial for us as investors.

Meanwhile, how are those investments going?

Actually, not particularly well. I commented two weeks ago about the continuing disconnect between oil prices and the prices of oil stocks and gave several possible reasons for it. But, while having a firm idea of what’s going on is great, from a practical standpoint of investing, the lagging action of oil stocks is terrible. I will admit that I thought our stocks would be a lot further ahead at this point in the cycle, with oil quite sticky at $60 a barrel and all indications that it could go quite a bit higher.

ADVERTISEMENT

Truth is, I’m getting a bit antsy.

Not to abandon our oil stocks, of course – because I still am convinced of the long-term thesis of fantastic returns in quality E+P oil stocks. But enough that I am looking for other opportunities in the meantime. Related: U.S. Shale Drillers To Become Profitable For The First Time

Like natural gas.

I mentioned a speculative short-term play in Southwestern (SWN) going into their 1st quarter report, which turned out very well indeed. And there is news that the first deliveries of LNG are being loaded from Cove Point in the last week, putting a second export option (besides Cheniere) on the table for domestic natural gas. These are small but tangible indicators that natural gas – which I had correctly left for dead for the better part of the last three years – may be finally ready to put in a long-term bottom in prices. It’s at least enough of an indication to get me to start looking again at natural gas E+P’s (with maybe an extra, minor exposure to shale oil) for a more interesting value play.

One company that rings a bell in this regard is Canadian Nat gas specialist Encana (ECA). I’m going to do some work on a few natural gas stocks that I haven’t looked seriously at for a very long time and report back next week. If natural gas is in fact putting in a bottom, this is one opportunity that won’t disappear overnight. And while we continue to wait for oil stocks to show the gains we think they should, it’ll give us something else to devote our energies towards. Stay tuned.

By Dan Dicker

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage


ADVERTISEMENT


ADVERTISEMENT



Leave a comment
  • Citizen Oil on March 29 2018 said:
    Apparently Jim Cramer disagrees with you regarding NG stocks. There seems to be a negative sentiment for the fuel especially in Democrat states . GE's power division has suffered tremendously because they overestimated the demand for new NG turbines. If NG is going to rally American producers need to cut production way down and LNG needs to pick up way beyond expectations. NG producers have always overproduced ever since fracking became the norm. This is before 2008, so it's likely not going to change if it hasn't for 10 years . 10 years of a massive glut in NG ! Who would invest in that silly mentality ?

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News