Frustrating timeWell I know, it has been like that for a very long time but, considering what happened in Saudi Arabia just over a week ago and to see this kind of muted reaction is frustrating to say the least.
However, I think this sets up the stage for a much longer and healthier bull market than what would be the case on a strong initial pop.
Already, oil is up around $4 since then which adds a lot of free cash flow for our Canadian oil & gas companies while this increase is not important enough to reduce at all global consumption. This will matter eventually as more debt gets repaid, more shares bought back and dividend increased at some.
The better part of the story is that U.S. shale will not go into a frenzy to drill more. Last week or on September 20 and following the event, the U.S. oil rig count was down 14 or a fairly large downtick and is now down 17% since last year. EIA production weekly estimates have been flat for many months now and considering that they were over-estimating actual production in April and May I suspect that it still is the case.
We should start to see a decline very soon. At the very least, this plateau means that these forecasts of continued U.S. production growth are completely off the mark and this so called glut by IEA in 2020 is nothing more than balooney.
Momo investments are also losing steam: pot stocks, FANG, bitcoin. Where is outperformance these days? Gold and that is about it. I would think that eventually some money, and it would only take a tiny percentage, will see these high free cash flow yields and growing values and move some here. Greta can convince some to stay away but, greed is a lot stronger than her crying and whining.