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.
However, ultimately, the price of oil doesn’t rise because people are excited about buying oil — crude rallies when demand for the commodity rises faster than supply.
It really is that simple.
Inflection points in the supply demand equation for oil are rare. In the period from 1998 through 2002, for example, rising demand for crude from emerging markets including China and India shifted the oil market from a period of glut to an era of scarcity. Ultimately that sent crude from lows in the teens in the late 90’s to highs around $150/bbl in 2008.
We believe we’ll look back on 2019 as the year we reached another major inflection point for oil. Specifically, the Saudi -led pump-at-will strategy initiated five years ago has finally had the desired effect – the recent era of persistent glut and shale oversupply is giving way to a new period of tightening supply and demand conditions.
Your complete guide to energy investing, from growth stocks to high-yielders.
In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.
Elliott and Roger on Aug. 31, 2020
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Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.
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Roger Conrad’s coverage of more than 70 dividend-paying energy names.