Crazy low sentiment
Going across most bullboards on Canadian energy, you can tell that there is an overwhelming sentiment of negativity and with reason:
1- Canadian political uncertainty: A minority government and risk of "anti-energy" coalition and lack of pro-business mentality.
2- Egress issues still unresolved: Line 3, TMX, Line 5, KXL with none going or resolved.
3- Global demand growth weakening: China/U.S. trade dispute and various signs of global economic slowdown.
4- Supply still abundant: U.S. shale apparently still growing, Norway starting up 440,000 bls/d project next year and spare capacity in place or OPEC+ equivalent cuts.
5- No geopolitical risk premium: despite unprecedented and successful attacks on Saudi facilities, no one is scared of any kind of supply shortage.
6- Tax loss selling: you may wonder who is left to sell Canadian energy stocks and to offset what gains?
7- Eco-nuts movement: EV's to take over the world, people to stop travelling, eating meat, whatever...
This is just a short list of negatives that I can quickly come up with and I am surely missing quite a few.
While some of these risks could materialize, it seems that we are or must be close to some sort of point of extreme pessimism. Volumes are low, interest is absent and if we look at valuations we must have priced-in a very large portion of what could possibly go wrong. At the same time many of these stocks seem to be forming a double bottom from their August lows.
Therefore, we could be close to a turn. What could cause these things to go up? Who knows? But, hope seems certainly gone when you look around and generally in equity markets that is a sign that most that wanted to sell have sold.