Energy & Commodities

Why Oil Prices May Shoot 15% Higher

Supply constraints and a global economy rapidly rebounding from the debilitating COVID-19 pandemic lays the foundation for much higher oil prices, Goldman Sachs global head of commodities research Jeffrey Currie argues.

“Near term our highest conviction long is oil where we still see brent [crude oil] averaging $80/bbl this third quarter with potential spikes well above $80/bbl. Global demand likely rose to 97.0 million barrels a day in recent days from 95.0 million barrels a day just a few weeks ago as the U.S. passes the baton to Europe and emerging markets, where even India is beginning to show improvements,” Currie said in a new research note to clients on Friday.

To be sure, oil prices have had a bullish bias of late… CLICK for complete article

Schachter’s Eye on Energy – June 16th

Each week Josef Schachter will give you his insights into global events, price forecasts and the fundamentals of the energy sector. Josef offers a twice monthly Black Gold newsletter covering the general energy market and 30 energy, energy service and pipeline & infrastructure companies with regular updates. We hold quarterly subscriber webinars and provide Action BUY and SELL Alerts for paid subscribers. Learn more

EIA Weekly Data: The EIA data on Wednesday June 16th was mixed. The headline Commercial Crude Inventories data was bullish for crude as it fell 7.4Mb (forecast of a draw of 3.3Mb) to 466.7Mb as Refinery Utilization rose 1.3% to 92.6% last week (last year was 73.8% and two years ago, 93.9% as refiners ramped up for the summer holiday driving season). As a result more product was created and the bearish information was that Gasoline Inventories rose by 2.0Mb. The big decline was due to Net Imports falling 845Kb/d or by 5.9Mb on the week. This occurred as Exports rose by 953Kb/d or by 6.7Mb on the week.

The rapid increase in US drilling activity is now impacting US Crude Production. Last week production rose by 200Kb/d to 11.2Mb/d (but is still down from 12.2Mb/d in mid-June 2019 but up 700Kb/d from a year ago). Over the coming months we see US crude production lifting to 11.5-12.0Mb/d as the increase in drilling activity and higher energy company cash flows are reinvested to stabilize production volumes which are still declining for many producers.

Total Product Demand rose by 2.86Mb/d to 20.57Mb/d. It is getting close to the demand of mid-June 2019 which was 20.81Mb/d. Gasoline Demand rose by 880Kb/d to 9.36Mb/d (9.93Mb/d in mid-June 2019). Jet Fuel Consumption rose 227Kb/d to 1.26Mb/d (1.67Mb/d in mid-June 2019). Cushing Inventories fell last week by 2.1Mb to 43.6Mb compared to 46.8Mb last year.

Baker Hughes Rig Data: The data for the week ending June 11th showed that the US rig count rose by five rigs (down one rig in the prior week). Canada had a large 16 rig increase (up by 15 rigs in the prior week). Canadian activity is now up 440% from the pandemic lows of last year. There are 93 rigs working in Canada now compared to 21 rigs working last year. Of the Canadian increase there were 16 more oil rigs working last week, or 59 rigs working, up from just seven last year. In the US there were 461 rigs active, up 65% from 279 rigs working a year ago. The Permian basin added four rigs and now has 236 working, up from 137 rigs working last year at this time or up by 72%.

The increase in rig activity in both the US and Canada should continue to translate into rising production.

OPEC June Monthly: The June report came out on June 10th. OPEC has its forecast for the year at 96.6Mb/d. In Q1/21 usage was 92.9Mb/d and they see this quarter having consumption of 95.3Mb/d. We concur with the consumption level for this quarter. Where we disagree is the demand forecast that OPEC has for Q3/21 at 98.2Mb/d. Our view is that this will likely come in at a lower level of 96.5-97.0Mb/d and that their projection of decline in world inventories of 1.5-2.0Mb/d will not occur. OPEC plans to raise production by 2.1Mb/d over the months of May, June and July which is more than needed to meet the seasonal summer demand increase. Once summer is over consumption is likely to back off by 1.0-1.5Mb/d during the fall shoulder season and increase inventories in storage.

For the month of May OPEC production rose by 390Kb/d to 25.5Mb/d. This compares to a pre-pandemic level of 29.4Mb/d in December 2019. The largest increases came from Saudi Arabia which raised production by 345Kb/d to 8.47Mb/d. The Saudi’s plan to raise production to 9.5Mb/d by the end of July (produced 9.67Mb/d in December 2019), then to 10.0Mb/d by year end 2021 and then to 10.5Mb/d in 2022. With demand not getting back to (pre-pandemic) levels of 100-101Mb/d, the increases in production by Saudi Arabia are clearly not needed.

Iran raised production by 42Kb/d as they found buyers for their discounted crude in China. Venezuela saw a rise of 45Kb/d to 531Kb/d. The difference in OPEC production of 25.5Mb/d last month and the December 2019 level of 29.4Mb/d or 3.9Mb/d is less than the demand destruction of over 5Mb/d over this time period. WTI in December of 2019 was US$64/b and now is at US$72/b. This does not make sense. Crude is overpriced due to speculative pressure and is not justified by the fundamentals. OECD Inventories according to the report were 102 days or 4.51Bb. This is down from 120 days in Q1/20 but is up from 93 days in pre-pandemic days.

Conclusion:

This month OPEC will increase production by 700Kb/d, and then in July they plan to lift production by a further 840Kb/d. OPEC will hold its next meeting on July 1st to determine future production increases or decreases depending on what happens with the Iranian nuclear talks and the resulting increase in Iranian crude production from August onward.

Bearish pressure on crude prices:

  1. The new Covid variant ‘Delta” is spreading around the world and is replacing the prior B.1.1.7 variant. This version from India is now the most active in the UK and has been found in 60 countries including the US and Canada. The problem with this version is that one dose of the Covid vaccines is only 33% effective against the strain. One needs two shots of the Pfizer version to get to 88% protection. This variant is especially virulent for young people who have not been vaccinated. To date there have been 3.81M deaths worldwide of which the US has over 600K, more than have died in all the US’s foreign wars. The highest number of single day new cases is occurring now in Afghanistan, Bolivia, Colombia, UAE and Zambia.
  2. Iran is in the final stages of talks to return to the 2015 UN nuclear deal and if an accord is completed in the coming weeks, they could increase production quickly by 1.0- 2.0Mb/d to 4Mb/d, up from 2.46Mb/d produced in May 2021. Iran last produced over 4Mb/d in 2016. Iran has been working to be able to ramp up production quickly as it has a new 1,000Km – 1Mb/d pipeline that bypasses the Strait of Hormuz. It is situated at Jask, in the Gulf of Oman. It will make shipping crude cheaper to buyers in Asian countries. China and India are expected to be the biggest buyers of this new crude supply.

Bullish pressure on crude prices:

  1. Rising vaccination levels to herd immunity level of 70% by July in the US is expected to provide a return to normal summer holidaying and energy consumption. So is Canada and the EU.
  2. Weather impacts (hurricane season) should start soon in the Gulf of Mexico which would necessitate shutting in some of the offshore production.
  3. High temperatures and heat waves in Texas and California are cranking up demand for air conditioning and natural gas is a beneficiary of this increase in electricity demand. NYMEX natural gas prices have lifted to US$3.24/mcf.
  4. There has been a lift in crude prices in the last few weeks as some commentators have commented that the Iran deal may come much later than the August forecast as talks drag on, delaying the large increase in Iranian crude volumes.

CONCLUSION: We remain skeptical of the optimism about the projected 4-5Mb/d full recovery in energy demand to 100Mb/d before year-end (OPEC forecast 99.8Mb/d). The tug of war between the normal summer holiday travel demand pick-up and the 3-4Mb/d increase in crude oil supplies this year remains the key determinant of future energy consumption and crude oil prices. We see demand picking up by around 2Mb/d before year-end which is less than the amount of production that will be brought on by OPEC alone. Between some OPEC cheating and Iran adding 1-2Mb/d from August (if a deal is concluded), the additional product will be in excess of current demand and will build inventories. This would endanger the OPEC bullish scenario.

WTI crude oil prices rose above US$72/b (first since October 2018 – today US$72.36/b) and are now at a mania level. A decline below US$66/b should start the corrective phase we have been forecasting. The current enthusiasm by hedge fund futures traders and now MEME speculators for the sector, appears to be like that seen in late 2018 when crude oil prices rose to US$76.90/b in September and three months later had declined to US$42.36/b, down by 45%. The price of crude now is above the pre-pandemic price of early 2020, yet demand is 4-5Mb/d less and production is ramping up by 2.1Mb/d from OPEC alone. This does not make sense! 

Energy Stock Market: The S&P/TSX Energy Index trades currently at 143. A close below 130  should initiate the next sharp decline. An initial downside target after such a breach is the 100 area. The expected general stock market weakness would be the catalyst for the energy sector to lose its current momentum and back off meaningfully.

Subscribe to the Schachter Energy Report and receive access to our two monthly reports, all  archived Webinars, Action Alerts, TOP PICK recommendations when the next BUY or SELL signal occurs, as well as our Quality Scoring System review of the 30 companies that we cover. We go over the markets in much more detail and highlight individual companies’ financial results in our reports. If you are interested in the energy industry this should be of interest to you.

Our June SER Monthly comes out on Thursday June 24th and includes our normal Stock Market and Energy Market Updates as well as an update of our Insider Trading Report and a guest article by Ron Barmby which will be on the ‘Hydrogen Strategy For Canada’. If you want to access this report and to become a subscriber go to https://bit.ly/34iKcRt to subscribe.

The Keystone XL Pipeline Is Like 2020 Weddings…. Canceled

 

CALGARY – Another Canadian oil pipeline has bitten the dust after TC Energy Corp. said it was walking away from the Keystone XL pipeline project, ending a decade-plus battle that pitted the energy industry against environmentalists as oilsands producers sought to export Canadian crude.

Construction on the pipeline was suspended earlier this year after newly elected U.S. President Joe Biden fulfilled a campaign promise to cancel its presidential permit in January.

TC Energy last month took a $2.2-billion writedown on the cancelled project, which pushed the company to a loss in its most recent quarterly earnings.

It approved spending US$8 billion in March 2020 to complete the pipeline after the Alberta government agreed to take a $1.5 billion equity stake in Keystone and provide a $6 billion loan guarantee to ensure work started immediately.

The Calgary-based company on Wednesday confirmed its decision to terminate the pipeline after conducting a comprehensive review of its options and consulting with the Alberta government.

The government said its final costs are expected to be $1.3 billion.

Read More

 

Schachter’s Eye on Energy – June 9th

EIA Weekly Data: The EIA data on Thursday June 9th was mixed. The headline Commercial Crude Inventories data was bullish as it fell 5.2Mb to 474.0Mb as Refinery Utilization rose 2.6% to 91.3% last week (last year was 73.1% and two years ago, 93.2% as refiners ramped up for the summer holiday driving season). As a result more product was created and the bearish information was that Gasoline Inventories rose by 7.0Mb and Distillate Fuel oil volumes rose by 4.4Mb on the week. Total Stocks (excluding the SPR) rose by a whopping 15.2Mb on the week to 1.29Bb. US Crude Production rose by 200Kb/d to 11.0Mb/d reversing last week’s decline of 200Kb/d which likely fell due to the Colonial Pipeline operational problems after the ransomware attack. Over the coming months we see US crude production lifting to 11.5-12.0Mb/d as the increase in drilling activity and higher energy company cash flows are reinvested to stabilize production volumes which are still declining for many producers.

Total Product Demand fell 7.5% last week or by 1.43Mb/d to 17.7Mb/d as the Memorial holiday  high-travel period ended. Gasoline Demand fell 7.3% or by 666Kb/d to 8.48Mb/d. Jet Fuel Consumption fell by 28% or by 409Kb/d to 1.03Mb/d. Cushing Inventories rose last week by 200Kb to 45.7Mb compared to 49.4Mb last year.

Baker Hughes Rig Data: The data for the week ending June 4th showed the US rig count fell by one rig (up two rigs in the prior week). Canada had a large 15 rig increase (up by four rigs in the prior week). Canadian activity is now up 370% from the pandemic lows of last year. There are 77 rigs working in Canada now compared to 21 rigs working last year. Of the Canadian increase there were 15 more oil rigs working last week, or 43 rigs working, up from just seven last year. In the US there were 456 rigs active, up 61% from 284 rigs working a year ago.

Conclusion:

This month OPEC will increase production by 700Kb/d, after raising production by 600Kb/d in May, and then in July they plan to lift production by a further 840Kb/d. With worldwide Crude Demand now around 95-95.5Mb/d (OPEC forecast) we expect by year-end demand may rise by 2Mb/d to 97-97.5Mb/d, but not back to pre-pandemic levels of 100-101Mb/d forecast by energy bulls. The three monthly increases by OPEC should fully meet all the world’s consumption increases this year. OPEC will hold its next meeting on July 1st.

Bearish pressure on crude prices:

 

  1. The new Covid variant ‘Delta” is spreading around the world and is replacing the prior B.1.1.7 variant. This version from India is now the most active in the UK and has been found in 60 countries including the US. The problem with this version is that one dose of the Covid vaccines is only 33% effective against the strain. One needs two shots of the Pfizer version to get to 88% protection and two shots of the AstraZeneca to 60% effective. There was no data on the Moderna vaccine. This variant is especially virulent for young people who have not been vaccinated. To date there have been 3.74M deaths worldwide of which the US has 598K (more than have died in all the US’s foreign wars). The highest number of single day new cases is occurring now in Afghanistan and Colombia.
  2. Iran is in the final stages of talks to return to the 2015 UN nuclear deal and if an accord is completed this month or in July in Vienna, they could increase production quickly by 1.0- 2.0Mb/d to 4Mb/d up from 2.39Mb/d produced in April 2021. Iran last produced over 4Mb/d in 2016. A deal would lift current sanctions on Iran’s oil, banking and shipping sectors. Iran has been working to be able to ramp up production quickly as it has a new 1,000Km – 1Mb/d pipeline that bypasses the Strait of Hormuz. It is situated at Jask, in the Gulf of Oman. It will make shipping crude cheaper to buyers in Asian countries. China and India are expected to be the biggest buyers of this new crude supply.
  3. China wants to restrain inflation and has told industry to not raise prices or horde inventories of raw materials. As a result, imports of crude in May fell 14.6%. With the maintenance season now underway this will hold off importation of crude for another month.

 

Bullish pressure on crude prices:

 

  1. Rising vaccination levels to herd immunity level of 70% by July in the US is expected to provide a return to normal summer holidaying and energy consumption.
  2. Weather impacts (hurricane season) should start soon in the Gulf of Mexico which would necessitate shutting in some of the offshore production.
  3. There has been a lift in crude prices as some commentators have commented that the Iran talks are not going well and that a deal may come much later than the August prior forecast, delaying the large increase in Iranian crude volumes.
  4. MEME madness has spread from buying stocks on margin like GameStop, AMC, Blackberry to Tuesday’s frenzy into Wendy’s which rose 26% on Tuesday and to crude oil options priced at US$100/b over the last few weeks. The popularity of US$100/b for the options is not just for 2021 but also into 2022. Nearly 100Mb of crude is now held by option traders, up five-fold in just a few weeks. Of these 15.9Mb are for the December 2021 options and 60Mb are for the 2022 December options. This non-fundamental investor mania has usually ended badly and we see this one being a bubble that, when burst, will see many books written about it. This mania appears to me to be worse than before the financial crisis of 2008 and is more like Tulipmania of the 1600’s.

 

CONCLUSION: We remain skeptical of the optimism about the projected 4-5Mb/d full recovery in energy demand to 100Mb/d before year-end (OPEC forecast 99.8Mb/d). The tug of war between the normal summer holiday travel demand pick-up and the 3-4Mb/d increase in crude oil supplies this year remains the key determinant of future energy consumption and crude oil prices. We see demand picking up by around 2Mb/d before year-end which is less than the amount of production that will be brought on by OPEC alone. Between some OPEC cheating and Iran adding 1-2Mb/d by August (if a deal is concluded), the additional product will be in excess of current demand and will build inventories. This would endanger the OPEC bullish scenario.

WTI crude oil prices rose above US$70/b (first time since October 2018 – today US$70.08/b) and are now in a mania level. We see crude topping in the US$68-72/b area and a decline below US$66/b should start the corrective phase we have been forecasting. The current enthusiasm by hedge fund futures traders and now MEME speculators for the sector, appears to be like that seen in late 2018 when crude oil prices rose to US$76.90/b in September and three months later had declined to US$42.36/b, down by 45%. The price of crude now is above the pre-pandemic price of early 2020, yet demand is 4-5Mb/d less and production is ramping up by 2.1Mb/d from OPEC alone. This does not make sense! 

Energy Stock Market: The S&P/TSX Energy Index trades currently at 139. A close below 130  should initiate the next sharp decline. An initial downside target after such a breach is the 100 area. The expected general stock market weakness would be the catalyst for the energy sector to lose its current momentum and back off meaningfully.

Subscribe to the Schachter Energy Report and receive access to our two monthly reports, all  archived Webinars, Action Alerts, TOP PICK recommendations when the next BUY or SELL signal occurs, as well as our Quality Scoring System review of the 30 companies that we cover. We go over the markets in much more detail and highlight individual companies’ financial results in our reports. If you are interested in the energy industry this should be of interest to you.

I was interviewed by Mark Bunting (formerly of BNN/Bloomberg) for his Uncommon Sense Investor product. The video interview on the energy sector can be seen on their website (uncommonsenseinvestor.com) or our own website where we have a link to the different interview sections. For long term investors this product should be one you access regularly to see interviews of knowledgeable players in different sectors of the markets, market overview or macro input.

We completed our review of 14 energy, energy service companies for our June Interim Report that will be released on Thursday June 10th. If you want to access this report and to become a subscriber go to https://bit.ly/34iKcRt to subscribe. Our next quarterly webinar is now scheduled for Thursday August 12th.

How China Beat Three U.S. Presidents to Become the World’s Solar Champion

 

(Bloomberg) — For Mayor Tom Hughes and the other politicians gathered to cheer the opening of a $440 million solar panel plant in Hillsboro, Oregon, it was a moment of glory.

The arrival of SolarWorld AG promised to be a turning point for his hometown just west of Portland. “Not just because of SolarWorld itself,” Hughes recalled, “but because of the other companies it would drag along with it to create this silicon-based and solar-based manufacturing cluster in Hillsboro.”

That was in 2008 and solar was on the cusp of becoming one of the fastest-growing sources of energy in a world rattled by warnings of climate change. From the White House to statehouses, U.S. leaders promised that green jobs could not only replace those threatened in the nation’s oilfields and coal mines, but guarantee safer and more stable employment.

Yet across the Pacific, a rapidly growing competitor had also set its sights on dominating solar manufacturing. China, eager to prove the supremacy of its socialist-market model, was mustering government investments that dwarfed the U.S. effort and coupling them with national mandates that forced utilities to use renewable power.

It established an end-to-end supply chain — the country now makes most of the world’s polysilicon, a key material in solar panels — and ignored pleas by environmentalists to close coal plants that supply the cheap electricity needed to make solar equipment. It also kept its labor costs lower than those in most industrial countries and has been willing to prop up unprofitable operations.The result? Chinese firms now supply three quarters of the world’s solar panels.

Read More

 

Schachter’s Eye on Energy – June 3rd

Each week Josef Schachter will give you his insights into global events, price forecasts and the fundamentals of the energy sector. Josef offers a twice monthly Black Gold newsletter covering the general energy market and 30 energy, energy service and pipeline & infrastructure companies with regular updates. We hold quarterly subscriber webinars and provide Action BUY and SELL Alerts for paid subscribers. Learn more

EIA Weekly Data: The EIA data on Thursday June 3rd was mixed. Commercial Crude Inventories fell 5.1Mb to 479.3Mb as Exports fell by 889Kb/d, or by 6.2Mb on the week. Motor Gasoline Inventories rose by 1.5Mb as Refinery Utilization rose 1.7% to 88.7% last week (last year 71.8% and two years ago 91.8% as refiners ramped up for the summer holiday driving season). Distillate Fuel oil volumes rose by 3.7Mb on the week. US Crude Production fell by 200Kb/d to 10.8Mb/d which may have been due to the Colonial Pipeline problems which normally moves 3.0Mb/d of crude from Texas to the east coast markets. Colonial is still ramping back up after the ransomware attack. Over the coming months we see US crude production lifting to 11.5-12.0Mb/d as the increase in drilling activity and higher energy company cash flows are reinvested to stabilize production volumes which are still declining for many producers.

Total Product Demand fell last week by 817Kb/d to 19.14Mb/d. Gasoline Demand also fell and was down by 333Kb/d to 9.15Mb/d. Jet Fuel Consumption rose as more people flew during the Memorial long weekend with a rise of 42Kb/d to 1.44Mb/d. Air travel is now back over the pre-pandemic levels of early 2020. So far this year overall demand year-to-date for products is 6.6% above last year as we recover from the pandemic plunge. Motor Gasoline demand is up by 10.0% from last year and Jet Fuel now is above last year as well with an increase of 1.9% from a year ago (year-to-date). Cushing Inventories rose last week by 700Kb to 45.5Mb compared to 51.7Mb last year.

Baker Hughes Rig Data: The data for the week ending May 28th showed the US rig count rise  by two rigs (up two rigs in the prior week). Canada had an increase of four rigs (up one rig in the prior week). Canadian activity is now up 310% from the pandemic lows of last year. There are 62 rigs working in Canada now compared to 20 rigs working last year. In the US there were 457 rigs active, up 52% from 301 rigs working a year ago. In the US they had an increase of three rigs drilling for oil to 359 rigs which is up 62% from a year ago. The state with the biggest increase in rigs this week was Texas with a four rig increase of which two were in the Permian. This drilling rig pick up should soon translate into rising production on both sides of the border.

Conclusion:

This month OPEC will increase production by 700Kb/d, after raising production by 600Kb/d in May, and then in July plan to lift production by 840Kb/d With worldwide crude demand now around 95-95.5Mb/d (OPEC forecast) we expect by year-end demand may rise by 2Mb/d to 97-97.5Mb/d, but not back to pre-pandemic levels of 100-101Mb/d forecast by energy bulls, including OPEC. Goldman Sachs and Barclays are calling for US$80/b by Q4/21 if demand rises over 100Mb/d. OPEC is now in this camp as well and expects that there will be a 2Mb/d shortage by the end of 2021. They will keep a watchful eye on demand and add production as needed but they want inventories to fall below the five-year average before they do so. OPEC’s next meeting is scheduled for July 1st.

Bearish pressure on crude prices:

  1. Rising mutation caseloads in Vietnam, Malaysia, Singapore and Taiwan are new outbreak areas.  Japan’s ICU health care system is at capacity and their largest cities (Tokyo and Osaka) are facing rising case loads. There is increasing pressure to cancel the Olympic summer games. Vaccination rates in the country are extremely low at 5% inoculated so far. The US State Department has issued a travel advisor for the country. In Canada, Manitoba still has record case loads in ICU beds and is accessing other provinces for beds for their serious patients.
  2. Iran is in the final stages of talks to return to the 2015 UN nuclear deal and if an accord is completed this month or in July in Vienna, they could increase production quickly by 1.0- 2.0Mb/d to 4Mb/d up from 2.39Mb/d produced in April 2021. Iran last produced over 4Mb/d in 2016. A deal would lift current sanctions on Iran’s oil, banking and shipping sectors. Iran has a new 1,000Km – 1Mb/d pipeline which started up this month that bypasses the Strait of Hormuz. It is situated at Jask, in the Gulf of Oman. It will make shipping crude cheaper to buyers in Asian countries. China and India are expected to be the biggest buyers of this new crude supply. Iran holds Presidential elections on June 18th so this may be the date for a nuclear deal to be announced.

Bullish pressure on crude prices:

  1. Rising vaccination levels across the US is lifting energy consumption.
  2. Weather impacts should start soon in the Gulf of Mexico which would necessitate shutting in some of the offshore production.
  3. Vaccine passports (or certificates) are getting more support from countries, increasing the prospects for a 2021 summer tourism industry in Europe. The UK may lead the way with passports and may start to issue them as early as next month. Re-opening across North America will increase gasoline consumption as people re-engage with family and friends and start to travel as they had done before the pandemic. In Calgary, the Stampede is going to occur this year with some restrictions (no chuck-wagon races).

CONCLUSION: We remain skeptical of the optimism about the projected 4-5Mb/d full recovery in energy demand to 100Mb/d before year-end (OPEC forecast 99.8Mb/d). The tug of war between the normal summer holiday travel demand pick-up and the 3-4Mb/d increase in crude oil supplies this year remains the key determinant of future energy consumption and crude oil prices. We see demand picking up by around 2Mb/d before year end which is less than the amount of production that will be brought on by OPEC and the US alone. Between some OPEC cheating and Iran adding 1-2Mb/d by August (if a deal is concluded), this additional product will be in excess of current demand and will build inventories. This would endanger the OPEC bullish scenario. Iran returning to full production is the danger to the US$80/b forecast. 

WTI crude oil prices are down modestly today to US$68.65. A breach of US$61.56/b would have negative implications. Technically, a close below US$57.63/b (the early April low) would be very bearish and set up a decline to US$48-52/b. The current enthusiasm for the sector appears to us to be like that seen in late 2018 when crude oil prices rose to US$76.90/b in September and three months later had declined to US$42.36/b or down by 45%. The price of crude now is above the pre-pandemic price of early 2020, yet demand is 5Mb/d less and production is ramping up by 2.1Mb/d from OPEC alone. This does not make sense!

Energy Stock Market: The S&P/TSX Energy Index trades currently at 137 having risen 16 points in the last two weeks as crude prices rose. A close below 111 (the mid-April low) should initiate the next sharp decline. An initial downside target after such a breach is the 100 area. The expected general stock market weakness would be the catalyst for the energy sector to lose its current momentum and back off meaningfully.

Subscribe to the Schachter Energy Report and receive access to our two monthly reports, all  archived Webinars, Action Alerts, TOP PICK recommendations when the next BUY or SELL signal occurs, as well as our Quality Scoring System review of the 30 companies that we cover. We go over the markets in much more detail and highlight individual companies’ financial results in our reports. If you are interested in the energy industry this should be of interest to you.

We completed our review of 14 energy, energy service companies for our June Interim Report that will be released this Thursday June 10th. If you want to access this report and to become a subscriber go to https://bit.ly/34iKcRt to subscribe.