MRP’s call on crude oil has been contrarian since its inception. Even now, although the West Texas Intermediate (WTI) benchmark is pricing oil at over $66 per barrel, well above the lower half of our $60 – $80 prediction, oil should still climb higher yet. Not only that, but we also believe that energy equities, should finally pick up the pace.
Back in April of 2016, “lower for longer” pricing was the outlook of many on Wall Street who were suffering from a case of Status Quo Bias, or SQB. The massive oil glut that sent prices tumbling more than 70% from 2014 to 2016 was so intense, that it caused many to think that oil would never regain its footing with skyrocketing US output via shale fields. The logic behind this assumption is understandable, but for every action, there is a reaction. This assumption underestimated the ability of most of the world’s oil producing countries to cut their own production and drain inventories, simultaneously overestimating shale’s efficiency and US producers’ ability to generate a profit with lower crude prices . . .