One giant game of Survivor

Eric Nuttall, Senior Portfolio Manager at Sprott Energy Fund released Sprott’s August Commentary, giving TAG Oil and our readers his thoughts on the energy investment world, which he calls, “one giant game of Survivor.”

Although institutional ownership is at its lowest level on record at 6.5%, and the general bearish nature of things seems to be pointing towards an immense global glut, to his mind, data without a layer of negative spin is showing the opposite. In fact, it’s showing a fast tightening oil market. 

The tightening market can be seen through:

  • Oil inventories are balancing
  • OPEC compliance remains good
  • Global oil demand keeps exceeding expectations
  • Production Growth has stalled (see blog post titled “The O&G production story in charts“)

The commentary also provides an interesting perspective that Mark Papa, the previous CEO of EOG Resource for 14 years, considered to be one of the most informed and well-respected persons in the business, shared at the Barclays Energy Conference in early September. 

“So the big surprise that I’m going to predict in a year from now is that total U.S. oil production is underperforming expectations of 99% of the populace and that conventional wisdom is once again turned on its ear just like the whole oil shale revolution turned conventional wisdom on its ear and we’re going to find that we’re lucky even when the price stimulus is right to see U.S. oil production growing at 700-800,000 Bbl/d and that all the predictions of U.S. production growing by 1.5, 1.6MM Bbl/d YOY are not even close to being right.”

He continues, “So what this means is we’re seeing the beginning signs of the fact that U.S. production is not nearly the big bad wolf that everyone thinks it is. As we move in 2018 you’re going to see more cracks in the façade of U.S. production growth in aggregate. Five months of flat production is telling you something. That’s long enough to indicate a trend.”

And from Eric Nuttall? “The ingredients for a powerful rally are in place.”

Enjoy the full commentary by clicking here.