Buying more XES


The oil markets are getting clobbered again because apparently the U.S. has a lot of cheap and easy to get to oil forever, there’s no reason for a risk premium on oil for say a bigger war in the Middle East and because we’ll all be driving electric cars next year. 

 

Yeah, I make fun of the oil bears at this point. While the trend has been their friend, that doesn’t change fundamentals. Production/supply growth is below demand growth. By a lot. Deep water wells aren’t being drilled much anymore and existing wells decline at about 8-10% per year. That’s 1/3 of the oil in the world (about 30mbd) that’ll be lower next year by over a million barrels per day each year for years due to the drop in megaprojects from a the trillion dollar capex cut.

I expect oil prices to rise gradually starting next month for years and if there is a was centered around Iran, we’ll see a spike to near $100/barrel – I expect this within 2 years.

I’m buying the SPDR Oil & Gas Services & Equipment ETF (XES) at the market because it will do very well as the U.S. increases production for any reason.

I think this fund can be 6-12% of an asset allocation right now.