Adam saw $ 100 on oil when oil was still in mid 50s…. he writes … We have reached a tipping point in this oil bull market. Since reaching the lows in the first quarter of 2016, oil prices have advanced almost three-fold, yet investors remain stubbornly bearish towards oil. Surging US shale production and an entrenched belief that global oil demand will peak and markedly decline as we progress into the next decade have caused investors to ignore the positive fundamentals in global oil markets over the last 18 months. Although oil-related investments have recently started to perform better, they continue to lag the oil price advance. Consensus opinion held that any OPEC deal to increase production would cause a near-collapse in prices as a new market-share war (with Russia now thrown in) would break out. Reflecting generally accepted consensus opinion, a Bloomberg headline shouted: “Coming Soon: ‘OPEC’s Worst Meeting Ever, Part 2.’ The Saudi about-face on production lays the ground for discord in Vienna.” But a funny thing happened after the June OPEC meeting concluded: even though a pact increasing oil production was agreed to, prices rallied with West Texas Intermediate (WTI) making a new high.
Oil prices have significantly exceeded consensus forecast over the last 12 months and, based upon our modelling for 2019, we believe the analytic community is again significantly underestimating oil prices. As we outlined in this letter’s introductory essay, https://cdn2.hubspot.net/hubfs/4043042/Commentaries/2018.Q2%20Commentary/2018.Q2%20Goehring%20&%20Rozencwajg%20Market%20Commentary.pdf investors do not understand the problems currently developing in conventional non-OPEC oil production which has already rolled over and is now declining.
In the next several years, our research tells us that declines in conventional non-OPEC oil production will accelerate significantly. Adam believe the bull market in oil, (ignored thus far every step of the way by the investment community) is set to dramatically accelerate to the upside.
His recommendation is…..Stay long oil and oil related investments.