Feature Article

Crude oil prices and the broader stock market started out 2020 with a bang – the S&P 500 reached an all-time closing high of 3,329.62 on January 17^th while West Texas Intermediate (WTI) oil prices jumped to $63.27/bbl on January 6, 2020 surpassing the highs set in September immediately following attacks on Saudi Arabian oil infrastructure.

At a time when the US shale oil and gas industry is getting used to living on less, one corner of the energy sector is still red hot: Liquefied natural gas exports. We continue to be unenthusiastic about this group. Here’s our take on the state of LNG.

We present our sector-by-sector outlook for energy in 2020 and beyond. We should expect global oil prices to generally hold the same trading range of the past few years and this would actually be a positive upside catalyst for energy stocks going forward.

One of the best things about commodity markets – and any sort of “real” asset – is that ultimately prices are based on supply and demand.

If the price of oil is “too high,” there’s a market response – rising production and falling demand – that pushes prices back into line over time.

Of course, oil prices can rise or fall in the short-run due to speculative flows in futures markets; in fact, that’s something we watch closely in Energy & Income Advisor over time.

In the midstream business, companies’ results are being affected very differently by the cutback in drilling rig deployment. Investors are treating sector companies almost as though the blow will fall equally hard on all of them. And MLPs especially can’t catch a break, almost no matter what they report. But the truth is there were very wide differences in the trends behind numbers reported by midstream companies in Q3. And that gap is likely to widen going forward.

One of the most important lessons to learn about earnings season is that the market’s reaction to the news can be more important than the news itself.

In other words, if a company reports weak earnings and issues cautious guidance for the quarter ahead; yet, the stock rallies, that’s a sign that market expectations were already low, and the bad news was priced into the stock before it released earnings results.