June 30, 2023

(COULD OIL PRICES DOUBLE FROM HERE?)

June 30, 2023

Hello everyone,

Let’s talk about oil and oil prices and what stocks could be a great buy.

It’s a distinct possibility that oil prices could soar in the next couple of years.

And why is that you ask?

It all comes back to inflation potentially being a sticky problem. It may stay at an elevated rate longer than anticipated.

It seems that there are too many people -who are cashed up – going after fewer goods.
If you are a business now in the U.S. and you want to hire unskilled labour, the price seems to keep rising – about 5-10% every six months.

OPEC, earlier this week, suggested demand would be strong well into the future. The group expects oil demand to hit 110 million barrels a day in about 20 years pushing the world’s energy demand up by 23%.

Bill Smead, who is the CEO of Smead Capital Management expects crude prices to rise to between $150 to $200 a barrel over the next three to five years. That’s an increase of between 100% and $170% from Tuesday’s Brent crude price of around $74 per barrel.

Another portfolio manager, Eric Nuttall of Ninepoint Partners, also sees bullish moves ahead for oil. Nuttall believes we have seen the lows for the year after Saudi Arabia announced voluntary production cuts.

Of course, much will depend on China’s economic performance in the second half of the year, and the ability of the U.S. and Europe to avoid an economic slowdown amid rate hikes.

Even allowing for all of this, research firm Rystad Energy believes upside pressure will materialize soon.

So, how do we as investors capture this move?

Occidental Petroleum would definitely be on my list as it plans to capture and store carbon dioxide. And this carbon capture business could be as big for Occidental Petroleum (OXY) as the cloud business AWS has been for Amazon (AMZN).

And another reason to buy OXY is John mentioned it in his last webinar as a LEAPS candidate.

 

                        Daily chart

 

                            Weekly chart

 

Nuttall names Cenovus Energy as another stock that will do well in the long term. He notes that this company has a high free cash flow yield of 12-18%. Furthermore, Nuttall expects Cenovus to hit its last debt target by the year-end, pivoting toward 100% of free cash flow returned to shareholders.

 

                            Daily chart

 

                          Weekly chart

 

 

 

Some housekeeping:

I’ll be leaving for the U.K. this weekend for a summer break.

I will be sending posts from the past that most of you have probably not yet read.

I will be back on deck in late July after a good rest.

Maybe I will catch you on Zoom this Friday (U.S. time) before I leave?

All the very best for the summer.

 

Cheers,

Jacquie