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Elliott Gue knows energy. Since earning his bachelor’s and master’s degrees from the University of London, Elliott has dedicated himself to learning the ins and outs of this dynamic sector, scouring trade magazines, attending industry conferences, touring facilities and meeting with management teams.

Elliott Gue’s knowledge of the energy sector and prescient investment calls prompted the official program of the 2008 G-8 Summit in Tokyo to call him “the world’s leading energy strategist.”

He has also appeared on CNBC and Bloomberg TV and has been quoted in a number of major publications, including Barron’s, Forbes and the Washington Post. Elliott Gue’s expertise and track record of success have also made him a sought-after speaker at MoneyShows and events hosted by the Association of Individual Investors.

Elliott Gue also contributed chapters on developments in global energy markets to two books published by the FT Press, The Silk Road to Riches: How You Can Profit by Investing in Asia’s Newfound Prosperity and Rise of the State: Profitable Investing and Geopolitics in the 21st Century.

Prior to founding the Capitalist Times, Elliott Gue shared his expertise and stock-picking abilities with individual investors in two highly regarded research publications, MLP Profits and The Energy Strategist, as well as long-running financial advisory Personal Finance.

In October 2012, Elliott Gue launched the Energy & Income Advisor, a semimonthly online newsletter that’s dedicated to uncovering the most profitable opportunities in the energy sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.

The masthead may have changed, but subscribers can expect Elliott Gue to deliver the same high-quality analysis and rational assessment of investment opportunities in the energy patch.

Articles

Look Before You Step

Last year, we called for the price of West Texas Intermediate crude oil to tumble to between $20 and $25 per barrel in the first half of 2016, citing the rapid growth in US oil inventories and limited storage capacity.

Unfortunately, the probability that oil prices will retrench to our target range has diminished significantly as the withdrawal season approaches. With the oil market entering a period of seasonal strength, hedge funds appear reluctant to push their luck on the short side until after the April 17 OPEC meeting.

Although investors shouldn’t expect this meeting to produce any earth-shattering agreements, you can count on oil ministers to try to jawbone oil prices higher or lower after the event, putting a floor of about $30 per barrel under WTI.

Any upside also appears to be capped, as a sustained rally into the low $40s per barrel would prompt shale producers to hedge their 2017 output, stemming the decline in US onshore production—the primary driver of a recovery in oil prices.

Moreover, even as global oil supply and demand rebalance in the second half of 2016, draining the excess inventories accumulated since mid-2014 will take at least a year, short-circuiting the V-shaped recovery in oil prices that some pundits continue to predict.

Bottom Line: We expect oil prices to trade between $30 and $43 per barrel for the balance of 2016, followed by a recovery to our lower-for-longer trading range of $40 to $60 per barrel in early 2017.

Despite this tight range, volatility and economic uncertainty will create excellent trading opportunities in energy stocks and master limited partnerships over the next three to six months. We’ll look to go long during the inevitable selloff in anticipation of a snap-back rally in late 2016, when incoming data points start to demonstrate that the global supply-demand balance has improved.

But in many cases, the recent oversold bounce in oil prices and energy stocks appears to be overdone, giving investors an ideal opportunity to exit any of the riskier, sell-rated names that they may still hold in their portfolios.

With many readers afraid of missing the boat on energy stocks, we explain why we remain bearish on refining stocks–a pocket or relative safety over the past year–and oil-field services and capital equipment names.

Oil-Field Services and Equipment: Exercise Caution

Despite the recent rally in shares of oil-field service providers, our negative outlook for activity levels in the international market and skepticism regarding the timing and magnitude of a recovery in North America explains why we remain underweight oil-field services and capital equipment. Many of these stocks have rallied too far, too fast and don’t account for overcapacity that remains to be worked off from the boom years.

Refining Our Outlook

The second golden age of refining appears to be winding down, especially for the inland refiners that flourished at the height of the shale revolution. The price spread between WTI and Brent has narrowed dramatically, erasing a huge competitive tailwind for US refiners. At this juncture, the potential downside risk outweighs any upside. Valuations and investor sentiment need to adjust to these realities. However, a painful first-quarter for refining operations, coupled with depressed oil and gas prices, could land shares of integrated oil and gas companies on the discount counter.

 

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  • Live Chat with

    Elliott and Roger on Apr. 26, 2016

  • Portfolios & Ratings

    • Model Portfolios

      Balanced portfolios of energy stocks for aggressive and conservative investors.

    • Coverage Universe

      Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.

    • MLP Ratings

      Our assessment of every energy-related master limited partnership.

    • International Coverage Universe

      Roger Conrad’s coverage of more than 70 dividend-paying energy names.

    Experts

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Peter Staas

      Managing Editor: Capitalist Times and Energy & Income Advisor