Stable higher prices will grow multiplesHistorically I think the reason the Saudis have always been willing to oversupply the market was it was an exchange for American protection.
Right now the Saudis are getting more money at $90's pumping less oil then they were getting pumping more at $70. Except for the period of shale this was always an option. Really the Saudis filled the American SPR.
It's quite obvious now we're in a new world with new people in control of Saudi production. Shale is not going to save the oil market from higher prices because there's not enough left in the tank to keep increasing production. The Saudis alone have the kind of excess supply that could put a cap on prices.
MBS is training the oil market to stay within the limits he wants which he has stated is plus $90 probably to about $110 Brent. I don't see where he's not going to get his wish.
I don't have my spreadsheets with me at the moment though I know Suncor really starts making money when oil is in the 90s. Billions more a quarter than when in the $70. Actually the recent share price appreciation should have been way higher considering how much more money Suncors can I add to the bottom line.
I think now when oil drops below $90 MBS is going to make sure that the oil shorts get ouched as Saudi oil Minister said.
Consistent higher oil prices will grow Suncor's multiples. Once Suncor starts to deliver quarter after quarter of huge cash flows, huge share buybacks and debt reduction to target there won't be much reason to sell the stock. The price of oil has recently been pretty volatile like when prices went from negative to +$125 then collapsing to $65 it's no wonder investors are reluctant to stick with the stock. It's like being in an unstable romantic relationship it sucks.
It's possible the Saudis may be trying to hurt Biden with higher oil prices and may let prices get way out of hand however I think they understand the best world for them - and the oil markets in general - would be a price steady between $90 and $110. After all they don't want consumers to cut back on their use and create demand destruction because that would just introduce the same volatility that I think has been driving them crazy for years.
Consistent higher oil prices will create consistent higher multiples.