Venture: USA Oil
Issue 88;
The Global Trends Investor (GTI) models highlighted an improvement in energy stocks this week. The price of oil has rallied from around $60 in April to $70 last week. In the USA, inventories have been falling, and global demand continues to grow.
World Oil Demand
The bear case for oil is well known. It is mainly used in transport, so the growth in electric vehicles, especially in China, has caused demand growth to slow. Yet the world still consumes 104 million barrels of oil per day, which is an all-time high. The bull case comes from chronic underinvestment, geopolitical tensions, growing demand from non-OECD countries, and new energy demand from data centres and AI.
Going back 30 years, gold and oil have tended to follow one another, albeit with a different cycle. It is surprising that oil has spent most of that time ahead of gold, until 2022. The recent slump in oil and surge in gold have left oil 59% behind. Investors who believe in mean reversion would be thinking that oil is undervalued and ready for a catch-up. While this seems likely, the timing is not. Oil could lag gold for a long time.
Oil Versus Gold
Just as gold miners are sensitive to a rising gold price, so are oil producers to the price of oil. For today’s note, we looked at the latest global stock trends and highlighted some companies worthy of further investigation. While some great ideas surfaced, most of which make for a strong case, only Vår Energi AS was a producer, with the others focused on oil services and the larger integrated stocks.
GTI Global Trends Spreadsheet – New Energy Trends
We shifted focus to global oil producers in search of value. In particular, the aim was to identify a company with high operational gearing that would benefit from an increase in the price of oil, and we believe we have found one based in the US.
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