2024-06-12 15:02:27 ET
Summary
- Now that supply has stagnated, I expect US oil output to falter due to low capital investment levels from most producers.
- With the Biden administration and OPEC creating a long-term oil price floor of ~$80 per barrel, exploration and development companies may have improved risk-reward profiles.
- My long-term favorite, Canadian Natural Resources, is starting to appear overvalued after rising despite no significant improvement in oil or natural gas prices.
- Although M&A hopes are high, investors may be better off in their cheaper peers, which now have room to raise their dividends considerably.
- Geopolitical issues in oil-producing areas and the political situation regarding the SPR reserve may cause more significant oil price fluctuations over the coming year.
Despite significant geopolitical turbulence, crude oil has remained in its range since 2022. The market fundamentals are relatively stable today. Output growth has improved, rising above pre-COVID levels in the US, notwithstanding relatively low drilling levels. Although crude oil prices have not increased significantly this year, producers such as Canadian Natural Resources ( CNQ ) have rallied. Even the crude oil E&P ETF ( XOP ) is up by around 10% this year....
Read the full article on Seeking Alpha
For further details see:
Canadian Natural Resources: Rising Premium To Peer Group Points To Lower Relative Performance