As investors, we’ve settled on focusing on well-run independent U.S. shale producers for the core of our holdings, especially those in the Permian basin. Although the oil markets seem to be stuck right now between $51-$55, these names have continued to hold their own and advance slightly – and will be the best positioned when oil breaks out of this range.
Now, I don’t want another column devoted exclusively to oil’s range and the circumstances, both on the bullish and bearish side for oil either stopping here or moving higher, as I believe it inevitably must, and stunningly so. There are, however, a wealth of bearish signs, including a continual uptick in rigs and production here in the U.S., now again nearing 9m barrels a day. Also, despite some small drops this week, the contrast of speculative longs vs. shorts is as stark as it ever gets. Everyone on the speculative side being long is almost always a bearish sign, although I’ll argue that the longs in the financial markets today are quite a bit different from those I encountered during my 2+ decades trading oil on the floor of the New York Mercantile Exchange.
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Still, I want to point out this chart of oil prices for the last 10 years – and now I want you to imagine that chart extending for the next 10, which, according to most of the oil experts out there, will be an almost static and flat line moving upwards perhaps 10 dollars over those 10…