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The 'Last Great Secular Oil Bull Market' Has Begun



  • The "Last Great Oil Bull Market" has begun.
  • Supply and demand for oil are in balance globally, and demand is rising faster than supply.
  • U.S. shale while prolific now is already running into cost and production limitations.
  • Deepwater oil development is not coming back due to the time frame problem with EVs coming.
  • Saudi Arabia is regaining oil pricing power. Buy oil stocks NOW!

Oil just entered a new bull market phase by rising 20% in price since I started imploring people to buy oil stocks a few months ago. While there will likely be a retracement of some sort, make no mistake about it, oil is going to rise dramatically in the next few years and hold a higher price level plateau until electric vehicles take hold.

Smart investors, who can control their emotions, should be overweighting oil and oil services stocks right now.

Oil Is Now In a Cyclical Bull Market

From its bottom in June to last week, the price of Brent Crude Oil rose well over 20% signifying a cyclical bull market. As is part of my "Core 4 Investment Method," we want to respect price trends.

Higher Lows for OilIn the U.S., WTI Crude Oil just made bull market territory rising, rising about 23% from its June bottom.

WTI ConstructiveThe question is will the trend hold? The past week there has been a little pullback, but it appears to be consolidation. As with any run-up in a commodity price, pullbacks are common.

With oil demand and supply roughly in line now, the question turns to inventories. As contributor Adam Mancini recently pointed out, oil inventories are falling and could be set to take another tumble.

Just this week, Saudi Arabia, announced more export reductions, which will certainly impact the markets. As I'll cover below, OPEC's cuts are having a great deal of success and seem to be on the verge of more. On balance, most of the evidence suggests that oil prices rise into new trading ranges.

EIASince I published the viral article An Iran War Is Coming - Buy Oil Stocks Now, I have been contacted by numerous finance, analysis, and media professionals (interestingly, no academics). One is futures trader Ralph Preston with Heritage West Financial, Inc. whose very

This article was written by

Kirk Spano profile picture
Kirk Spano has managed money since the 1990s avoiding 3 major crashes, while creating income streams and finding high upside opportunities. He continues to manage wealth at his boutique investment firm and also consults for hedge funds and private equity. His passion is helping hardworking people make more money with less risk. Kirk is the leader of the investing group Margin of Safety Investing, where features include: the Quarterly Outlook & Game Plan, a monthly Global Trends ETF Report, access to the model portfolio & weekly research, buy & sell alerts, option strategies for cutting risk and retirement income, and chat. Learn more.

Analyst’s Disclosure: I am/we are long HP, ECA, OXY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I own a Registered Investment Advisor, however, publish separately from that entity for self-directed investors. Any information, opinions, research or thoughts presented are not specific advice as I do not have full knowledge of your circumstances. All investors ought to take special care to consider risk, as all investments carry the potential for loss. Consulting an investment advisor might be in your best interest before proceeding on any trade or investment.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (340)

Xenogears23 profile picture
thoughts on EXXI cash flow 10 million higher for every dollar oil above 63 i think
You should look up Chinese oil report which says that their reserves are depleted and they have to go on a massive oil buying starting 2018 to replenish them. That report changes the demand picture a great deal in favor of even higher prices.
spend my cash profile picture
Buy 5 Australian lithium producers,
market caps range from $750Million -$1.50 Biliion
throw in a few cobalt names, Austraia based, near to production,
hold for 3 year,
ride off into the sunset, rich and smiling!!
Kirk Spano profile picture
Thanksgiving Thoughts On Freedom, Love And Emotional Investing
murjames profile picture
over 10 million barrel draw this morning for gas and distillates and should bring down inventories once more.
Kirk Spano profile picture
folks probably won't really figure this out until at least next summer, but folks investing now should do very well (well pun). Long and strong ECA, HP, OXY, XES, XOP
FTTH investment guru profile picture
What about TUSK for an onshore play? Not only do I think they are well positioned, they have side businesses like power restoration where they just won a $200m contract to help rebuild PR.
WhyNotBuy profile picture
Stick with deep water. Be wise. IMHO
WhyNotBuy profile picture
Do not let Wall Street puppets side-track your due diligence here. Deep sea oil is cheaper than it has been in 35 years and now is the time to buy. The Street does not want you buying as can be seen by this article so ask yourself why. The answer is because they are accumulating. See the giant institutions taking up new positions or adding to existing positions in companies like RIG, NE, ESV, RDC. These are MAJOR institutions with real inside knowledge. Buy the deep sea drillers now or stay here and be side tracked by issues that are silly and meaningless. IMHO
Kirk Spano profile picture
actually Wall Street probably does want you to buy deepwater oil stocks so they can short those back into the oblivion that Seadrill just went into. I expect half the dedicated offshore industry to go bankrupt within a decade, led by those focused most on deepwater like RIG.
WhyNotBuy profile picture
Black Rock and GS just took huge positions in deep water. They are a few of the Wall Street institutions buying huge blocks of RIG, NE, DO, ESV, RDC. It is their pen-puppets trying to keep the rest of the folks from buying these assets for a dime on the dollar. EV is a time related farce. Accumulate deep sea drillers as the dollar war rages on and oil is kept artificially low as a weapon against the BRICS. IMHO
WhyNotBuy profile picture
These huge institutions are long and own 99% of shares so the idea that they want the little guy to buy so they can then turn around and short is comical. The little guy cannot move the needle. IMHO
WhyNotBuy profile picture
For EV to work, you would need 3 super single unit highways across the United States with a huge hydraulic lift on each side to lift one side or the other 5600 feet higher as a seesaw effect and to lend itself to a gravitational battery recharge. The lifts would run on a schedule. It is 50 years into the future at least. The continental divide would be the pinnacle point. IMHO
Electric cars have to be charged too, and the energy has to come from somewhere. Electric cars use a *lot* of energy, compared to a house. Oil and gas will power electricity generation for another, er, generation. Unless somehow we all decide to go nuclear for power generation. And a thousand years from now it will all be space-based solar.

So oil has about a thousand years to go. I think we're more interested in just the next, oh, century or so. Maybe the next ten years. Or five. I'm not sure if we've seen peak oil yet, but I think we have seen peak oil *companies*. For the most part, oil will never again be a growth industry. The price per barrel may go back up to $80/100 or so. Except for some Saudi kid with a messed up Excel spreadsheet, it would never have come down from there. The only real question is whether it goes much higher than that in the next five years.

Which it might if we have a disruptive middle-east war. Then non-middle-east prices will go much higher, for some time. The odds of that in the next five years? Hard to say of course. In spite of all, I'd say it's still fairly low.

Is this then a secular bull market? Or just a reversion to the norm. And over the next thousand years, even if the industry overall trends down, I think there will be secular bull and bear markets in oil. If you asked me this twenty years ago, before fracking, I might have said otherwise. With fracking the usable reserves have gone way up, and as the price rises the greenies will be pushed out of the way. Yes, bull and bear markets for another century or six.
Kirk, what are your thoughts on CHK?
Kirk Spano profile picture
High risk, high reward on CHK
Interesting article, but the report of the demise of deep water drilling does not appear to be accurate. It has recently been reported that the costs of deep water have been dropping greatly this year and break even is approaching $50.00 a barrel and becoming as competitive or more competitive than shale oil according to a report by Wood Mackenzie. See Bloomberg article:


Also, oil trader Andy Hall who shut down his hedge fund last July, said in his final letter to investors that the dramatic fall in the costs of deep water offshore was one of the factors that would keep the market well supplied at around $50.00 Brent.
Kirk Spano profile picture
gilbd, NO, NO, NO deepwater is nowhere near a breakeven of $50 per barrel all in. DON'T BELIEVE THE HYPE!!! Some shallower water is approaching $50 when leases are NOT included in cost. From start to finish, virtually all oil under the water is $60+ breakeven and deepwater is generally $70+. In addition, to think that banks and majors aren't super concerned about not being able to get their sunk in money back on billion dollar plus megaprojects, you are missing the point. It does not matter if you think EVs will take market share in a decade, it matters what the investor's risk tolerance is to that potential scenario. Deepwater is NOT coming back to where it was. NEVER. It probably won't make it halfway back. See day rates.

WhyNotBuy profile picture
Day rates are going higher than in 2014 when the oil prices were first engineered down to collapse the BRICS. Do you need the link? Deep sea oil is the future oil supply. Follow my posts brothers and do not be so easily persuaded by anyone but your own due diligence. IMHO
Cyclical Trade profile picture
I realize this is two decades ago, but deepwater started growing in the 90's under a much lower price environment. How was that possible?
Thanks for the interesting article. I am sure oil will go much higher in the next few years. EV's will get more popular but I dnt think they will " take over" I think EV's in the city are a good idea while semi trucks , trains, ships and and people in rural areas will prefer gas and diesel. It is a good combination. The problem with EV's is that it will take a lot of electricity to run a car. I believe an electric car battery takes 20 KW to go 100 miles??? ?? That is quite cheap but these are very small cars. This tells me EV will be great in the city. Less smog, less noise, no more emissions testing, and it won't be as hard to increase power lines. In rural areas that will be a lot of transmission lines to get to a small town and people driver a lot in rural areas. Also, I think oil companies will do very well with EV cars. It will take a lot of natural gas to power up all these power plants and no doubt if there is a buck to be made you can bet BP Shell, Mobil will have at least a few EV recharging stations along side their gas pumps. I think both gas and EV are a great combination but won't hurt the oil companies if they learn to service customers properly. Also, dont be too surprised if you someday see an electric power plant with a big sign that says MOBIL , BP, or Shell on it.
pgace123 profile picture
Unlike Europe, North Americans loves large trucks and SUVs. Good luck turning people to small cars. North Americans also love to travel long distances which is something that is currently not practical for an EV. There will be a marker for EVs no doubt, I just wonder what percentage of drivers. I expect several more oil cycles before Alternate fuels are actually taken seriously by the masses. Infrastructure will be the key. "IF YOU BUILD IT THEY WILL COME"
I wonder if the earliest major factor in the ultimate end of oil will be increasing use of CNG for transportation fuel. It seems the huge known supply of natural gas and likely ongoing cost advantages will increasingly favor its use versus oil distillates.
For the life of me I can't understand why CNG has never really taken off. At $3/MMBTU, on an energy equivalent basis natural gas is the equivalent of $18 oil. It seems to me that with that kind of a cost advantage, gas would give EV's a run for their money.
pgace123 profile picture
T. Boone Pickens lobbied lick crazy to streamline CNG as a replacement for oil but it has not come to fruition. Politics and red tape is my guess.
UPS uses CNG in their trucks (at least in my market - Atlanta). I agree it makes sense for it to be adopted as a transportation fuel more widely.
Sir V-i-val profile picture
No,no,no,no no....you can not have my drillers....not befoe I get a 150 percent return on them in less than 2 years...and then maybe I will sell half!
Sir V-i-val profile picture
but I am willing to sell you a ton of fried air shares ...Tesla as much as you like
WhyNotBuy profile picture
Accumulated RIG and NE today and few shares MO. Buy these names boys and girls. I counted 8 EVs on the highway today AND 456,000,000 gas sucking pigs. IMHO
Is it possible there is a merger in the works? Seems like there should be one or two other energy stocks at all time highs besides CVX.
Kirk, I enjoyed your article. It was well researched and I do love looking at charts. I sold TRP in the fifties after Barron's put in on the cover. Oil was over a hundred and John Kilduff said oil would drop into the twenties. It did and I never bought back my position. Oil has rallied back to 50 and CVX is at an all time high (any reason why?) and TRP is approaching it's all time high after dropping to 28. Kilduff predicts 42 for crude by the end of the year. I don't have any positions in this sector but like SU and CVX. If the dollar does rally and crude does test the recent lows I would consider an initial position.
Kirk Spano profile picture
CVX is at all time high on oil rise and misperception company is bullet proof.
Rhystic Scrying profile picture
"CVX is at all time high..."
CVX hit 134.85 on 2014-07-24.
Extreme Income Plus profile picture
Kirk, I agree with much of your article; I really do. My largest holding is AMZA, and I do believe the energy business will get back on its feet soon. Dan Dicker of thestreet dot com also agrees with you. He may be even more optimistic than you are.

I'm an "all of the above" guy. I have solar panels on my roof; a small battery bank/inverter/etc, so I love solar...for some applications. As a supplement, as a backup, as an auxiliary method of power, it's fine. I also have a gas-powered SUV, and love that too.

Now running the US' infrastructure on it...um not anytime soon. Supertankers? Planes? Semi's? Ain't gonna happen for a very long time, if ever.

Why, as @COBeeMan said above, can't oil and alternative energy coexist? Let me use my solar for what I want, and let me use my gasoline-powered SUV for what I want.

Just don't FORCE me to buy an EV or solar or wind, and don't tax me so others can buy them. Because that is tantamount to me buying someone else's technology. No thanks.

I'm fine with EV's, charging stations, etc. Just don't make me buy them. Give me the option.

You're not saying that I should be forced to pay for this stuff, are you? Are you willing to let early adopters buy these and test the technology until it works, and let it trickle down?

Seems to work for iPads, cell phones and other stuff.

We're $18 trillion in debt; spending trillion$ to pick and choose a favored pet technology has never worked, and it never will. Solar's been subsidized for years, and equipment makers have gone bankrupt right and left.

Let the market decide what works and what doesn't.

Jim aka Extreme Income Plus
Kirk Spano profile picture
I think that fossil fuel and all other companies should pay for their negative externalities. I don’t like subsidies or tax breaks for any industry, including massive breaks for fossil fuels. I like hybrids too. Tell us about the nat gas SUV.
Ray Branton profile picture
I am old enough to have lived through other major oil busts: At previous bottoms I have seen insiders giving up and selling their stocks, proliferation of peak oil theories, predictions of the end of offshore oil and gas, etc. All these ideas could be - as they have been previously - merely symptomatic of a major long-term bottom for oil and gas. Human beings are notoriously poor at seeing into the future. Recency bias tempts all of us to project our latest pain into the long-term future. I enjoy your writing, Kirk, and I follow you on SA. Your various projections may, of course, be right! I have bought more energy-related stocks over the last year as a contrarian investment. I agree strongly with your call to buy oil and gas.
Kirk Spano profile picture
thanks Ray, I'll look you up
spend my cash profile picture
@Ray Branton ...guess you haven't followed the 10+year bear market for silver.
gdl profile picture
12 Oct. 2017
Questions for all the EV people.
1. Right now what runs our electrical grid?
2. If Solar/wind is going to replace oil/coal how much land will be needed to build the solar and wind farms?
3. What about the environmental impact for animals being killed by wind turbines or for that matter solar panals?
4.What will be the battery size need to be to power an 18 wheeler or a train?
5. How will EV operate in cold climates without a decrease in battery power or a decrease in range? I grow up in a cold climate and cold is not a friend to batteries!
6. As someone mentioned previously what about all the products we get from oil?
I could go on but oil will be with us for the foreseeable future.
COBeeManHorizons profile picture
gdl - the answers don't really matter because if someone wants to buy it someone will find a way to sell it to them.

The real question is, will it be profitable or not?

Personally, I think oil and EV will coexist for decades because neither one will ever be a perfect solution.

Therefore, I think there is money to be made on both, but in different ways.
Kirk Spano profile picture
1. Nat gas, nukes and coal
2. not much land at all
3. solar doesn't have blades
4. undercarriage
5. heaters
6. Newlight Technologies
so- called fossil fuels are a net positive for all of mankind-

world governments have too much power-

you will miss your freedom- and you will look back on the days of fossil fuel as "the good old days" plenty of food, heat, and riches for the masses-

fossil fuels are " concentrated energy"
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