Everything that's happening today will inevitably lead to an oil bull market. The only thing readers have to worry about now is a matter of timing the near-term cautiousness with the long-term optimism. This fine balance of navigating your emotional and cognitive mood will be critical in determining your ultimate long-term payout.
What do I mean by that?
In the near term, there are a lot of key hurdles we have to navigate through:
OPEC+ is expediting the unwinding of voluntary production cuts.
Non-OPEC supply losses are happening and need to show up in the market.
Real uncertainty over global oil demand amidst the tariff chaos and how it will impact global oil demand.
What will global oil balances do while everything unfolds?
By Q4 this year, most of these hurdles/variables will be answered. At this point, and with a bit of luck, perhaps the energy stock valuations will be so attractive as to make the buy opportunity "obvious".
Here's what I do know with a high degree of certainty:
US shale crude oil production was already rolling over, so the incoming supply drop is a certainty.
Associated gas production will be weak and with the structural demand increases coming, natural gas will be the first to start the multi-year bull market.
OPEC+ production increase over the summer will be subdued relative to supplies today. The impact of the truncated production increase will be minimal and the physical oil market will sniff that out soon (in the form of flat crude exports).
Saudi Aramco increased OSP (official selling price) to Asia today, signaling higher-than-expected demand in key regions like China. Despite higher supplies, this is an interesting signal to watch.
My prediction is that in the coming months, the fundamental datapoint will continue to point in one direction (trending bullish with non-OPEC supplies disappointing), and the perception/narrative will remain bearish.
This increasing disconnect will create a lot of opportunities for patient investors. I think the clarity coming later this year coupled with some of the variant perceptions we have will allow us to take advantage of what's to come.