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Jeremy McCrea, CFA Profile picture
@JeremyMcCreaCFA
Nov 18, 2022 • 6 tweets • 5 min read • Read on X
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Thread: Why has Oil & Gas been so volatile? Since 2018, the majority of all CDN E&P buying has come from high-turnover funds. Thus any WTI weakness had them rushing to the exits. Encouragingly, low-turnover funds have become the main buyer in 3Q

More energy inst. buying trends:
2/ As CDN Oil & Gas names hinted at bigger dividends & more growth post Q2 earnings, we saw these 'style' of funds be the dominant buyer in Q3. This theme likely continues as balance sheets allow for more ‘shareholder friendly’ items and growth into 2023 #WTI
3/ Importantly, some of the largest global funds are now picking up CDN Oil & Gas names. Given their AUM size, it can take multiple quarters to establish a position, suggesting there is more large block buying to come in future quarters #energy #CrudeOil #OOTT
4/ Since 2018, most buying of CDN Oil & Gas names have been from energy focused funds. Q2 was the time where the 'Generalist' investor finally came back and Q3 looks to repeat this trend again (and in size)! The sector remains 'investable' for the Generalist investor now #energy
5/ Energy security is a global theme and foreign investors continue to see CDN Oil & Gas names attractive, buying $3.5 bln in Q3. (offsetting selling from CDN fund managers). With the TSX Index 20% Energy, CDN investors likely still come back to the space #EnergyCrisis #alberta
6/ In total, we saw $3.3 bln in net buying of CDN E&Ps in Q3 (based on institutional 13F filings of more than 5,000 funds that have held a CDN Oil & Gas stock). Overall, the trend looks very favorable heading into 2023 #energy #investing

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More from @JeremyMcCreaCFA

Jeremy McCrea, CFA Profile picture
Nov 8, 2023
The EIA came out w/ their Short Term Energy Outlook. These are the largest revisions in key data points impacting crude oil markets today. Although many adjustments are small, it shows the directional bias the EIA sees with its forecasting models - a thread #oott #WTI Image
OPEC Total Spare Oil Capacity was revised lower by 12% or 0.6 mln bbls/d for 2024 (mostly due to Iraq that relied on the northern Iraq to Türkiye pipeline, for access to global markets, that has now been out of commission since Mar 2023) #crude Image
U.S 2024 oil demand was revised up +0.7% - despite another -1% revision in per capital gasoline demand - the lowest in two decades now. Remote work, fuel efficiency, high gasoline prices and inflation were factors of note #refinery #diesel Image
Read 8 tweets
Jeremy McCrea, CFA Profile picture
Aug 23, 2023
What's leading to Oil & Gas volatility? A considerable part could be attributed to Portfolio Managers being forced to sell their oil & gas investments as they face continued & unprecedented net mutual fund redemptions (at -$5.1 bln for July 2023) and $26 bln YTD now #energy #oott Image
These redemption concerns are still likely influencing PMs’ decision-making choices, with these PMs likely keeping their focus/investments in larger, more liquid energy names. Ultimately, smaller Oil & Gas names may not be seeing the attention they otherwise should deserve #TSXV Image
Leading to a more dislocation between small & large cap valuations is the flow of capital. Passive Equity ETFs (invested in more larger/liquid names) have seen net inflows of $12 bln (LTM), whereas Equity mutual funds have seen net outflows of $23 bln over the same period #ETF Image
Read 4 tweets
Jeremy McCrea, CFA Profile picture
Mar 17, 2023
The EIA released its Annual Energy Outlook
Here's 15 forecasts that went right and wrong over the past decade - a thread #oott #oil #natgas #renewables
Oil Demand: In 2011, oil demand was forecast to be 19.1 Mbbls/d by 2022 (actual: 17.7 Mbbls/d) Image
Part of the energy revisions reflect changes to U.S. population growth (which has been revised down 6% since the 2018 - the first year with forecasts out to 2050). By 2050, U.S. population is expected now at 370 mln vs. 395 mln people previously. Image
U.S. Crude Supply: In 2011, oil production was forecast to be 3.8 Mbbls/d by 2022 (actual: 9.6 Mbbls/d).
2050 production forecast has been revised 5% higher y/y to 11.2 Mbbls/d. But overall, for the next ~30 years, the EIA expects production to remain mostly flat #permian #bakken Image
Read 15 tweets
Jeremy McCrea, CFA Profile picture
Feb 9, 2023
The risk factor with energy investments continues to drop. The combined loan book by Canada's 6 big banks shows a 92% decrease in impaired loans to Oil & Gas (to $230 mln). What are the additional implications? -a thread #oott #energy #oilandgas
The banks comfort in the Oil & Gas sector plays a major role in capital spending plans (and ability for M&A). Despite loan impairments down, the banks have still reduced their overall lending to Oil & Gas by 54% since 1Q20 to $27 bln.
On a relative basis, Oil & Gas is now only 1.8% of the CDN bank wholesale loan business. As ancillary fees decline, so to has desire to lend, especially to smaller-cap E&Ps. The result is less sector growth, less 'farm-teams' for the majors, less exploration, etc
Read 4 tweets
Jeremy McCrea, CFA Profile picture
Feb 8, 2023
These are the EIA's key forecast revisions impacting natural gas markets. Although many of the adjustments are small, it shows the directional bias within their models. Overall, negative revisions for production; upward revisions in consumption for 2024, as NYMEX prices come down Image
LNG volumes are taking longer to pick-up in early 2023 but ultimately are still expected to grow to 13.5 bcf/d by YE 2024 #LNG #Natgas Image
Natural gas consumption doesn't quite reach levels seen last year (in both winter and summer months). This is typically the result of weather; with current demand being revised down slightly from last month Image
Read 5 tweets
Jeremy McCrea, CFA Profile picture
Feb 7, 2023
EIA came out with their Short Term Energy Outlook
- These are the largest revisions in key data points impacting oil markets today. Although many of the adjustments are small, it shows the directional bias the EIA sees with its forecast models - a thread
#oott #oilandgas #WTI Image
With China showing more signs of opening, oil demand was revised up 1% (160 mb/d). Is there more oil demand revisions to come? Possibly. Expected crude demand in 2023 is still only up 5% to 15.8 mln b/d (from 14.4 mln b/d in 2020) #oott Image
U.S. oil production in 2024 was lowered 1.4% (150 mb/d) - with much of this oil supply decline near the back-end of the year. As earning season progresses (and capex budgets are revised), we may see more estimate revisions to come #crude #permian #eagleford #midland #bakken Image
Read 6 tweets

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