THE B

Oil market, The Big Picture

Episode Summary

During my career as an economist, I used to be told by my mentor. “Energy consumption is the signal the economy is recovering or heading to depression.” In this episode, I'll be talking to my good buddy Hursh (@hurshidn - Twitter) and discuss the thesis: Why oil is cheap?

Episode Notes

Disclaimer: It is important to understand investment is risky and might entitle losses, and the content on this episode doesn't constitute investment advice. 

By the time we recorded this episode, data presented by Buy Shares indicates energy sector stocks are the worst-performing with average returns of minus 35.04%. Also, Oil (WTI) where below 50$. Why I believe oil commodities and sectors equities are cheap. Hence, they are a good trade. 

1. Artificially low demand due to lockdown and economic slowdowns.
2. Capital outflow from the sector negatively impacting supplies.
3. Energy transformation supported by policies and cheap capital (credit), otherwise less attractive due to low return on investment (from a fundamental standpoint).
4. Renewable energy usage of oil products.
5. The risk of environmental/fiscal policies limiting shale or sand oil production in North America.
6. Geopolitical risk in the Gulf and East Mediterranean regions.