November 10, 2024
Trend: Short-term = Neutral; Long-term = Bullish
- The big move in the US dollar whacked most commodities hard
- With Trump’s win, his ‘drill baby drill’ stance suggests more supply, which would put pressure on oil prices
- On the other hand, if he goes after Iran with oil sanctions, it could offset ‘drill baby drill’
- Oil again tested the 67.00 area support level but jumped higher, fueled by rising tensions in the Middle East
- Tensions are still high with Iran maintaining its threat to attack Israel
- If no escalation, we expect oil prices to drift lower, likely re-testing ~65.00
- Long-term, the lack of investment in this sector will result in a serious supply problem in the next few years
We like energy going forward.
On the demand side China is starting to open up, and India’s fuel consumption in February hit an over 24-year high. On the supply side, governments imposing windfall taxes, tight regulations, and allowing no new drilling permits, are all major disincentives for producers. Capital expenditures in the oil sector are at 35-year lows and that lack of investment in that sector is going to cause a serious supply problems longer-term.
We are all for greener energy, but we need to be realistic on the time frame…we are going to need fossil fuels for much longer than these governments are projecting.
Longer-term we expect oil to have a strong next couple of years, certainly seeing $100 & potentially hitting $150 or higher in the next few years.
In the near-term, if we have a recession, that would hit demand and likely push prices lower. If that happens, it will present another great buying opportunity.
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