With turmoil in the Middle East dominating headlines, many investors are wondering what the recent and growing unrest in the region means for oil prices and for equity portfolios.
In my new Market Perspectives piece, "Oil's Precarious Balance," I provide my take: While I certainly can't predict the outcome of events in the Middle East, oil prices are likely to remain toward the upper end of their recent range for the foreseeable future given current supply and demand dynamics. Even without a sustained spike in oil prices, there's a strong case for sticking with energy stocks simply based on valuations.
First, here's a quick look at my expectations for oil supply and demand. Currently, oil prices remain elevated because global demand has continued to climb, despite slower growth in China, and supply overall has been unexpectedly constrained by both geology and geopolitical unrest. Looking forward, oil supply is
Stocks saw elevated volume and volatility last week, and the 100-day simple moving average on the S&P 500 proved to be the proverbial line-in-the-sand for bullish investors. I opined last week that the market seemed to have sufficiently cycled back down to oversold territory, so with a little more technical consolidation and successful testing of nearby support levels, the next move higher could easily commence at any time. So, the question remains as to whether that was the big new buying opportunity, or whether more backing-and-filling is needed. Personally, I would prefer to see a successful test of the 200-day SMA, but the market might not be so generous.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading
Free cash flow in the North American energy sector is about to soar, and that trend should continue for the next 5-10 years - even with declining oil and gas prices - says US brokerage firm Raymond James (RJ).
For investors, it could (should?) mean higher multiples as energy producers turn into more sustainable cash flow machines.
The heart of RJ's argument is that the massive overspending by producers on new land plays is almost over, and production costs have stabilized. At the same time, oil and gas production per well is increasing - sometimes dramatically.
Stable costs and higher production. The result? A new era of positive, free cash flow that should last several years.
Some supporting evidence comes from a second research report - also issued on July 14 - by the #2 Canadian brokerage firm, BMO Nesbitt Burns. In a 26 page summary introduction report to their