WTI crude oil climbed to the highs of the week as the US dollar sagged and the Bank of Canada stoked hopes that a central bank pivot is near. It rose more than $4 from the lows and finsiehd the day just below $88.00.
There's a bit of an inverted head-and-shoulders pattern shaping up in crude but we'd have to get above $95 to give me any confidence in it. Interestingly, multiples are expanding on oil companies as the market prices in a higher-for-longer scenario. That's pushed the XLE ETF close to the highs of the year. That's not what global central banks want to see.
The story continues to be a lack of investment and I want to highlight some comments from major oil-field service companies in earnings reports over the past week.
Baker-Hughes:
"In the oil market, we expect continued price volatility as demand growth likely softens under the weight of higher interest rates and inflationary pressures. However, we expect supply constraints and production discipline to largely offset any demand weakness."
"In the oil market, we expect continued price volatility as demand growth likely softens under the weight of higher interest rates and inflationary pressures. However, we expect supply constraints and production discipline to largely offset any demand weakness."
“In the natural gas and LNG markets, prices remained elevated as a multitude of factors increased tensions on an already stressed global gas market… This situation has resulted in record-high LNG prices but has also slowed down switching from coal to gas in some developing countries.”
Haliburton:
“Oil and gas supply remains fundamentally tight due to multiple years of underinvestment... Against tight supply, demand for oil and gas is strong, and we believe it will remain so."
"Operators remain disciplined. Their commitments to investor returns require a measured approach to growth and investment... we remain sold out through the end of the year and into next year"
Schlumberger:
"Despite concerns over the slowdown of global growth rates and the potential for recession, the fundamentals of energy as a critical resource remains very constructive."
