Eric Nuttall: Oil in multi-year bull market, supply crisis ahead
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Supply and demand fundamentals show that oil is in a multi-year bull market with a supply crisis brewing.
That’s according to Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners. He manages the company’s Ninepoint Energy Fund, which he said was the best-performing energy fund of 2021.
“The risk/reward ratio for me in the industry is incredible,” he told Investing News Network in an interview. “My biggest challenge is that everything looks good – large caps look good, small caps look good. Oil looks good, natural gas looks good. services look good, offshore drilling looks good – everything looks good.”
Nuttall said supply-side factors are key for oil right now, and explained that there are three main baskets to keep in mind: U.S. shale, Organization of the Petroleum Exporting Countries (OPEC) and the rest of the world.
Looking to 2022, he said U.S. shale is no longer experiencing hypergrowth, meaning production will increase, but no longer outpace global demand growth. Meanwhile, OPEC is about to exhaust its spare capacity.
“By the end of this year, I think we will have exhausted OPEC’s spare capacity, and that will be the most bullish catalyst for oil in the last decade,” Nuttall said during the conversation.
The “rest of the world” category includes major oil producers like Shell (NYSE:RDS.A,LSE:RDSB) and BP (NYSE:BP,LSE:BP), which Nuttall says have not invested enough in new production since 2014, and therefore will effectively show no growth until the end of the decade.
In terms of what this means for prices, Nuttall said it’s difficult to give a forecast for 2022 due to variables such as COVID-19, but he thinks oil will be “well above” US$80. a barrel this year, with a chance of reaching 100 USD. Looking further, he sees a new all-time high of US$140-$150 in the charts for oil.
“I am very confident that we are in a multi-year bull market for oil. Energy stocks, despite the race, still represent in my view a generational opportunity due solely to energy ignorance – people are frankly ignorant of how the oil is used and how long it will take to move it,” he explained.
“We are all going to be consuming oil for the rest of our lives, and yet this fear of peak demand leads to a reality of peak supply. The writing is on the wall: We are headed for an oil crisis. oil supply.”
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Securities Disclosure: I, Charlotte McLeod, have no direct investment interests in any of the companies mentioned in this article.
Editorial Disclosure: TInvesting News Network does not guarantee the accuracy or completeness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the views of Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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