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Is anyone having second thoughts about whether the oil bull market is back? Maybe the whole thing was a bear market rally.

In any case, I could never invest in this way. I can't predict the future and don't think anyone can. In my case, I'm better off with a diversified portfolio of stocks & bonds & commodities (gold).

I've seen many people lose a lot of money doing this kind of sector / theme speculation over the years. Sometimes people gamble and win big, but that still doesn't make it a good idea.
 

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I'm not having second thoughts. $65 was obviously an aggressive price, but the fundamentals are pointing only one way. It's March and oil demand is already surging whereas oil and gasoline supplies are continuing to decline worldwide. Recent lockdowns in Europe suggest some demand may stagnate, and many refineries in Texas are still down, but this is just delaying the inevitable.

People are driving and flying more than anytime since the pandemic began, and it's only March. I think prices in June and July will be far more indicative of the real underlying trend and I am happy to wait until then. My safety valve is sticking with the low debt and low cost operators like CNQ who can operate at maximum production down to $30 US WTI.
 

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I'm not having second thoughts. $65 was obviously an aggressive price, but the fundamentals are pointing only one way. It's March and oil demand is already surging whereas oil and gasoline supplies are continuing to decline worldwide. Recent lockdowns in Europe suggest some demand may stagnate, and many refineries in Texas are still down, but this is just delaying the inevitable.
Here's what I still don't understand about this kind of analysis. Surely, you aren't the only person who figured out the future.

Wouldn't everyone trade on this long ago, meaning that in an efficient market, current energy/futures prices already reflect the expectation?
 

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Because it is not a sure thing. Commodities are notorious for not behaving as one would suspect (both up and down), and especially oil which is highly politicized/weaponized. WADR to Doctrine and I understand where s/he is coming from given a good portion of my career in O&G, but s/he sounds a lot like Eric Nuttal and Josef Schachter talking about a bull market in oil for some years now. They (and Doctrine) will be right but the question is when and how long is one willing to wait. Given the mult-year saga for oil not materializing, that is why the market lags potential results at this time.

I doubt very much that demand will go back to pre-pandemic levels, and if it does, it is a few years out and then will turn over within 5 years thereafter. Carbon taxes and the momentum towards renewables are here to stay.
 

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Wouldn't everyone trade on this long ago, meaning that in an efficient market, current energy/futures prices already reflect the expectation?
There's no such thing as an efficient market.
 

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There's no such thing as an efficient market.
Well, maybe efficient market isn't the right term, but I would be concerned that people with more expert / inside knowledge than me have already traded and moved the price, to the point I'm at a disadvantage.

It's the same concern that holds me back from trying to time the stock index or interest rates. Even if I was knowledgeable in these fields, I'll bet that there are a whole bunch of people at Goldman Sachs with more data than me, plus crooked insider connections and contacts at the central banks. Even if I do tons of analysis, and worked in the field, I will be at a disadvantage versus these information experts & insiders.
 

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It may be that at $60 oil, all of this is now accounted for. I believe I am more realistic than the perma bulls. I have been in the trade while oil was under $30, and even held through negative pricing, so there you go. If $60 brings on enough oil supply then that will tank the price. It still looks to me like demand is going to come on much faster than supply for at least the next 6 months unless something fundamentally changes. Suncor in particular I still feel is individually underpriced by at least 40% and that name in particular has a lot of catchup to do, even if oil fell to $50.
 

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I think oil usage in the US is about to erupt in the next few months...not sure if this is already baked into $60/barrel but this place should be back to pre Covid environment by July.
 

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I think oil usage in the US is about to erupt in the next few months...not sure if this is already baked into $60/barrel but this place should be back to pre Covid environment by July.
I suspect that could be true for the USA come the summer, provided there is not a 4th wave from the variants in the making (which it increasingly appears to be the case). I doubt the rest of the world is as impulsive as the USA is though. I don't disagree though that SU could be a $40 stock by late summer. Does not matter for me since I haven't directly owned a commodity stock for some years. Regardless, that really will not change the AB landscape much in terms of contractor activity and jobs. The prudent players in the industry will retire damaged balance sheets first.
 

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Well +3% on XEG today is already something if it's sustainable.

My two Energy stocks each went up +5% today. They are both at +60% YTD. Can't complain.
 

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COVID vaccinations are accelerating, and other than India, infections and deaths are decreasing on every continent. It's just a matter of time before demand spikes.

Everyone is seeing what is happening in lumber and crop prices, as well as other areas where there is demand - huge price spikes because of shortages with little new capacity available. And nothing exceeds the capital investment costs of energy and oil. And those capital investments, which take 4-6 years for large projects, simply aren't being made. The last major projects from pre-2014 have already come online.

There isn't going to be oil for everyone when the world turns back on. It will require a price spike to mute demand. We're going to see what oil price the world can sustain before people stop driving.
 

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There is still almost 10 million barrels per day being held off the market via OPEC+, so even if demand jumps from today's level back to pre-pandemic 100 million barrels per day, the supply is there....today.

I do agree, however, that major investment is needed now to be able to sustain that supply going forward. Oil prices will be good for a number of years...so a bull market in oil in the near term but not a super commodity cycle or a decade or so. I even expect some price peaks/surges on a temporary basis while this sorts itself out.

The USA is expecting spot gasoline shortages this summer....not because of crude supply or refining capacity, but a shortage of tank truck drivers after many of them left the industry in 2020. Could be a similar problem here. It is hard to get people back once they have left en masse for other pastures. It is the same kind of problem in any supply chain.
 

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The USA is expecting spot gasoline shortages this summer....not because of crude supply or refining capacity, but a shortage of tank truck drivers after many of them left the industry in 2020. Could be a similar problem here. It is hard to get people back once they have left en masse for other pastures. It is the same kind of problem in any supply chain.
Shhh...! Gas prices here are already over $1.40 per litre, which is above pre-pandemic levels, despite the lessened demand. I've seen predictions of $1.70 by this summer in Vancouver, but I wouldn't be surprised to see it go even higher.
 

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Shhh...! Gas prices here are already over $1.40 per litre, which is above pre-pandemic levels, despite the lessened demand. I've seen predictions of $1.70 by this summer in Vancouver, but I wouldn't be surprised to see it go even higher.
Let's not forget the carbon taxes that have been added....
 

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I know I was paying over $1.65 a couple years ago in West Van ...thats when Horgan spent tax money on trying to find out why Vancouver fuel cost so much lol.
 

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Suncor just posted Q1 earnings, total blowout: 0.49 EPS (0.32 expected)
That's great news for all of Canada...impressed that they had their upgrader cooking along at 97%...must be a record.


Oil Sands operations Crown royalties have been updated from 1% – 3% to 4% – 6% and Syncrude Crown royalties have been updated from 2% – 4% to 9% – 12%.

Looks like Kenneys coffers will start to tinkle again soon.

CNQ reports Thursday...hope they are on the spring board as well.
 

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What's not to like?

-Huge buybacks - 12 million shares in Q1, almost 400k a day.
-Still paid down $1B of debt in the quarter
-This in a quarter where WTI was substantially lower than current quarter;
-Capital expenditures are less than half pre-COVID. Pre-COVID, SU was regularly spending $1B+ a quarter on growth initiatives, now less than $300M.
-Extra profits continue to funnel into 2/3 debt reduction, 1/3 extra buybacks

This quarter is in line with virtually every other oil company - far less capital expenditures confirmed. I think buybacks are the way to go and SU is on a slow march back to $40+. I also think oil prices are heading to the moon because of sustained lack of capital investment. India is the only major country in the world with an uncontrolled COVID outbreak, and that may even be peaking now. USA has commenced export of vaccines - the beginning of the end.
 
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