RE: FALLING1 Mar 2023 16:28
Here’s the long term view of oil outlined by the manager of Blue Whale fund to cheer you up! I favoured Trinity oil which too is suffering. I expect both share prices will move up again just as fast as they dropped!
“ But the energy sector itself is now far more appealing. The biggest driver of its renewed appeal for investors are the indicators of supply challenges from the three largest oil producers – the US, Saudi Arabia and Russia.
In the US, the shale revolution in early 2010 was one of the most significant breakthroughs in the 100-year history of the oil industry. We believe it is unlikely to be repeated, whilst economics and growth profiles are deteriorating as high decline rates, cost inflation, and depletion of the best wells all begin to bite.
In Saudi Arabia and indeed OPEC as a whole, we believe the record of consistently missing production quotas demonstrates their “spare capacity” is close to being exhausted. Coupled with worsening US relations, this is likely to bias OPEC towards limited supply growth.
Clearly, for Russia, geopolitics are worsening. The withdrawal of Western technology and oil field services firms from Russia will weigh heavy on supply, whilst Western nations taking a stance against the war in Ukraine is leaving the Russian oil industry painfully lacking investment.
Finally, a general lack of investment globally with total industry capex slashed by around 50% over the last 8-10 years has put pressure on the sector. Another telling stat is that enrolment numbers in petroleum engineering courses in the US are also down approximately 50% over the same period.
Whilst we do not attempt to forecast the oil price, all the above leads us to believe the price is well supported at these higher levels.”
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