Thread by @The_RySci

1/While we’ve all been bickering about banking contagion, bearish demand, US crude builds/adjustments and how to best play the cycle w/in the cycle… some of the best #EFT follows are bringing attention to an important point. We still haven’t solved the underinvestment problem🧵

2/The latest GoRozen @Go_Rozen commentary makes some great points in this regard. Below are some key excerpts, starting with capex, which remains for the Super Majors at less than half ($/BOE) the ‘07-‘16 period avg.

3/ Next, the import role shale played in preventing an energy crisis last decade. I don’t think it can be understated how much of a windfall this was for the US and the world in general with access to reliable/affordable energy by adding 22.4Mboe/d ‘10-‘20

4/However, the low interest rates, capital availability, and C-suite incentives that drove that growth are at an end. With the stark realization that cube^♾️ won’t work assessment of available tier 1 acreage, equipment, and manpower means shales peak could be near (~’24-‘25)

5/ All while demand is set to hit new all time highs on the back of Chinese reopening and strengthening demand from EMs, specifically Asia. GoRozen makes an import point on the resilience of demand for EMs and that past models based on OECD majority consumption no longer apply.

6/ This sets up further tightness through year end, with the potential for global inventories to plunge to levels not seen since the ‘80s.

7/ Imo we are not even close to the peak of this cycle, which will not come until the capex meaningfully returns. I fully expect even more volatility than we’ve seen the past 18 months until it does. Full article link below. Enjoy the weekend 🍻 4043042.fs1.hubspotusercontent-na1.net/hubfs/4043042/…