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Eric Nuttall

Jan 24, 2020 • 6 tweets • 3 min read • Read on X

1) As the market freaks out over short-term demand destruction from the coronavirus (SARS dented demand by 0.26MM Bbl/d in '03) , I'm focusing on what will matter after the panic ends: US growth deceleration, peaking of global offshore production, and Canadian egress solutions:

2) 2020 will be the first year in several where US production growth does not fully satisfy global demand growth...this is an extremely important development. Why? #OOTT

3) Non-OPEC+ production has been totally reliant on the US for growth over the past 5 years...without the US non-OPEC+ production would have fallen by 600,000Bbl/d while demand has grown by ~7.5MM Bbl/d. Global offshore production peaks in 2020...the trend will continue... #OOTT

4) The call on OPEC is unanswerable in a few years time...spare capacity will be exhausted and long-lead cycle time of global offshore cannot respond in time (thanks to Bernstein for their terrific piece on global offshore production)... #OOTT

5) So where to invest? Goldman out today agreeing with me...Canada. Lowest valuations + worst sentiment + imminent catalysts to re-rate valuations that are currently at all-time lows... #OOTT

6) Canadian E&P's are the cheapest in the world yet have the highest free cash flow yields...without adequate egress. Normalized differentials in the medium term = another boost to FCF (and buybacks and dividends). Buy the panic...bull market post Q1 seasonal oil demand weakness

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Eric Nuttall

@ericnuttall

May 9, 2023

Is the f.e.a.r. of recessionary-induced demand destruction overblown? Is the weakness in oil from a collapse in the physical demand, or the financial demand for oil? Here is what the refiners are saying in their Q1 conference calls:

BP: "China really is the main story where post the COVID lockdown we've seen strong demand on the retail side...the Chinese story from an industrial capacity perspective is still to play...it's why we are constructive on oil prices looking out through the rest of the year"

Phillips 66: "But generally for US gasoline we're seeing demand better than last year, and we're seeing global demand about 3% better than last year...diesel did start off weaker with a warmer winter, has begun to firm...global distillate demand a bit stronger than last year."

Read 6 tweets

Eric Nuttall

@ericnuttall

Mar 20, 2023

The antidote to fear is facts. While banking sector panic-induced crude liquidation may continue, leading to still lower oil prices, when the dust eventually settles, what do oil fundamentals and energy stock valuations look like? Some thoughts:

The past year has been a struggle for oil bulls. The positive catalysts of a reopening China, US shale hyper-growth ending, and OPEC spare capacity exhaustion have been trumped by recessionary f.e.a.r.s and the largest SPR release in history. Price is now setting narrative.

Despite a softish start to the year, mainly due to a very warm Winter in NA and Europe, we expect draws to accelerate as China fully normalizes and works down their domestic inventory levels.

Read 8 tweets

Eric Nuttall

@ericnuttall

Nov 14, 2022

Oil trading down $3/bbl because OPEC forecasts oil demand to "only" grow by 2.2MM Bbl/d in 2023? Really?!? Why are so few asking the obvious question: where exactly are the incremental barrels going to come from??? A thread.

The oil market has been undersupplied throughout the year, evidenced by falling inventories, despite recessionary fears, the largest SPR release in history, and China COVID-zero policies. An impressive feat!

US shale hyper-growth is over. "Discipline is the new normal" + another year of 15% service cost inflation means 0.5MM Bbl/d +/- of growth in '23 and Energy Aspects is calling for peak shale in '24.

Read 6 tweets

Eric Nuttall

@ericnuttall

Mar 21, 2022

Back from a week on the beach with the kids and time for an oil macro update. Where do things stand now and where are we headed? First, our compass...global oil inventories continue to plummet and the "gap to normal levels" continues to widen = bullish.

Last week the IEA released January OECD stocks: a massive counter seasonal drop with levels now at a 302MM Bbl deficit to the '15-'19 average and more importantly...a 51MM deficit to the Jan '10-'14 average...the time when oil last averaged $96WTI.

Yet, the bombshells the IEA dropped were their estimate for potential lost Russian volumes...a staggering 3MM Bbl/d in April and an admission that OPEC spare capacity is extremely thin. An Iranian nuke deal + Venezuelan concessions are a drop in the bucket vs. 3MM Bbl/d.

Read 6 tweets

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