Via Bloomberg
My view on oil is that brighter days are ahead and that in 6-12 months time this will prove to have been a great time to buy into oil at a discount. However, buying into oil is not straightforward, so I favour buying into oil stocks in cash. It's not glamorous, but it should benefit from some decent gains.
With US oil falling into negative territory for May's contract to start the week I came across this Bloomberg piece advocating for a turnaround in WTI in the not too distant future. The thinking is as follows:
1. Energy stocks rallying: The S&P500 Energy Index jumped up 10% last Friday despite US oil falling. While May's contract pushes extra losses today the June contract fell less showing the price disconnect before the expiry of the front month contract.
2. Rig counts fall: Around 13% of the US drilling capacity was closed last week and that meant the 5 week reduction in the US oilfield activity to 36%.
3. Heavy Call Open interest for the US oil fund: There is a heavy call to put skew from ETF investors looking ahead beyond the social containment measures to when countries follow Germany and New Zealand's lead. Take a look at the chart below.
So, once the wheels of the world get turning again, we should see a pick up in oil prices and a return to prices being supported by OPEC+ production changes.
