Through much of August and early September, benchmark US oil prices continued to defy conventional wisdom of an impending decline, hanging in the same mid-50s per barrel trading range they’ve held since late January. Meanwhile, natural gas has rebounded more than 20 percent from early August lows, squeezing the elevated ranks of short sellers.
Energy prices’ resiliency this summer hasn’t convinced too many investors to jump back into sector stocks. But a number of producers, midstream operators, service companies and even MLPs have now made noticeable bounces off last month’s nadir even before last weekend’s drone strike on Saudi Arabia.
Whether they continue to recover will depend on two things. First, how much have their earnings been affected by oil’s decline from the mid-70s and natural gas’ fall from last November’s nearly $5 per million British Thermal Units. Second, will we see the further drop in energy prices that so many have expected, possibly from the onset of a global recession?
As we saw in second quarter results posted by coverage universe companies, the impact of energy prices’ slide this year is quite mixed. Numbers clearly show growth has picked up for the strong, even as other companies slide toward distribution cuts and even bankruptcies.
Our buy and sell recommendations reflect that reality at a time when many investors aren’t really differentiating between the good, bad and the ugly. That’s why we’re simultaneously pounding the table to buy some energy companies and to sell others.
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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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