Welcome to the breakout edition of HFI Research Blogs!
Following what we thought would be a period of consolidation in both oil and energy stocks, today's price action following the positive OPEC meeting illustrates that the consolidation is over.
OPEC reaffirmed its commitment to bring its production cut to 100% compliance down from ~150%, and some estimate that to be an increase in production to the tune of ~1 million b/d. The real barrels that will likely be put on the market ranges around ~600k b/d, and as we updated to HFIR subscribers on Thursday, OPEC crude exports have already risen in the month of June.
Following the OPEC meeting, oil and energy stocks broke out of the recent consolidation trend:
Meanwhile, our two largest positions closed at multi-year highs:
The rally is back...
The market consolidated for the past month as the uncertainty surrounding OPEC forced some market participants to cut exposure to energy stocks and oil. We wrote to HFI Research subscribers that if one were to add, the June consolidation would prove to be an opportune time to add.
Going forward, we forecast that global oil supply/demand models will show decreasing global storage balances despite higher OPEC production. We expect oil prices to trend higher and energy stocks to follow.
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Disclosure: I am/we are long CRC, GXE.TO.