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Stop Everything And Buy Oil Equities

Mar. 08, 2021 11:02 AM ETSU, XOP, SU:CA22 Comments
OTT Equity Analysis profile picture
OTT Equity Analysis



For those who followed my previous article on Suncor (SU), or who follow the oil markets in general, you'll know that it's been a pretty favorable market for energy stocks here recently. The purpose of this article is to declare that it's time to buy Oil and Production names (XOP) and provide some digestable rationale.

Many think this is just a short term spike to be sold. I disagree. The Saudi Energy Minister Prince Abdulaziz bin Salman declared last week that "'Drill, baby, drill' is gone forever".

These comments come along with the OPEC+ announcement to continue to allow the market to stay under-supplied cements the control of OPEC, and also shows their confidence that they can retain control of the oil market over a longer period of time. In this article I want to call out a few factors that make me think they will stay in control, at least in the short term.

Being an oil investor is not easy, just look at the comments section on any long article. You'll see comments about crude oil going by the way of whale oil and EV's replace ICE cars and making the industry uninvestable. More on that later. For now I want to share a couple of anecdotes that have recently helped me as an oil investor keep my finger off the sell button:

Bull markets climb a wall of worry

I'm not exactly sure who to attribute this to, but reader Fred L. pointed it out to me in the comments of my prior article. It's extremely true that through all of this there continues to be risks and concerns that threaten us. Put in a different way, I heard a television personality use this one:

There is always a shark circling the boat and a tidal

This article was written by

OTT Equity Analysis profile picture
Full-time Investor. Commodities, Long and Short.

Analyst’s Disclosure: I am/we are long SU, XOP, BTEGF. 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.

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 (22)

OTT Equity Analysis profile picture
Well this is off to the wrong start.
pgace123 profile picture
@OTT Equity Analysis it will age well
@OTT Equity Analysis - i am playing this as a pause on the next leg up..

IF draws on crude and products start over next few weeks...

if general market does not crash... and crude stays over ~~~ $58 - 60

i trade part of my positions... i am reloading on SU and EPM here.. good luck
OTT Equity Analysis profile picture
@65wildcat @pgace123

Thanks guys, I added to SU Monday as well.
pgace123 profile picture
Really enjoyed your article. Agreed with most of what you wrote. My favs are SU, COP, XOM, HAL, SLB, TCW (tsx).

The late T Boone Pickens was bang on, natty gas will rule the near future
Long on MPC,CVX and CNQ
sonicted profile picture
People are getting too bullish oil now, in my view. Have sold Torc and Repsol recently. Think the bull will continue into 2022, but not without setbacks. Only long positions now Suncor and Schoeller-Bleckmann (SBO), though I am heavily overweight these two names in my portfolio. Target for SU.TO is CAD 40, for SBO it is EUR 100. Also continue to like Teck, which has oil exposure.
OTT Equity Analysis profile picture
@sonicted Valuations are still very low, I think the market still thinks this is a temporary price spike.
@sonicted On the recent run up in SU, the stock took a pause whenever it hit overbought levels. So I wrote short term OTM calls against it today. Might be playing it too cute but the generous premiums might make it worth it.
OTT Equity Analysis profile picture
@DrT Best of luck, what strike and date did you sell?
long on SU, hope it goes to 30 soon
OTT Equity Analysis profile picture
@rogarg77 We are at least green today when the rest of the oil stocks I track are red. That;s very positive.

XOP is attractive too just because so many of the names in there get bought as part of other ETF's. I keep forgetting that ... the ETF buying is a huge tailwind.
Great write-up! Long SU, CPE, MRO, XOM and FENY
Nice piece with good analysis. Grid infrastructure and steady (non-intermittent) electrical supply simply does not exist to support rapid transition to electrify everything including building heating and cooling or transportation. The transition will take many years, a huge amount of money, and a very large quantity of materials produced and transported by fossil fuel to build out the necessary infrastructure. Idiot green zealots want to immediately shut down anything that emits carbon but seem clueless as to the amount of carbon energy required to build out non-carbon energy sources and the necessary transmission and distribution infrastructure.
OTT Equity Analysis profile picture
@nesd Thank you for the kind words. I somewhat expected feedback that this article wasn't up to the quality of my others, but I wanted to get the messages out there and didn't have any more time :)
I love Nursing home Joe. He’s made me rich beyond anything I ever could have imagined. This was and still is a once in a decade opportunity to grow your wealth with oil. OPEC has joe bent over the wood post and the spankings are just beginning
OTT Equity Analysis profile picture
@n00binvest19 It is interesting how this has turned out. I am still worried about hyperinflation at some point making the money worthless, but it's better to have it and lose it than never have it at all.
@OTT Equity Analysis I hope to have it and spend it before I die. Hopefully leave a bit to my kids because I do feel sorry for them possibly having to grow up in a future America run by socialists. They will probably be one of the smarter humans of their generation (not that the bar is very high) and should do OK finding a career in the future economy. GL to all and God bless America
OTT Equity Analysis profile picture
@n00binvest19 Thanks. I hope to be able to leave my kids land, but we'll see if that's possible.

Good luck man, I wish you the best.
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