• Seth Golden posted an update 2 weeks, 6 days ago

    Jeff Currie: “Absent a major supply disruption, we therefore believe that price risks are skewed to the downside in coming weeks, with oil prices already trading above our fundamental fair value of $63/bbl ahead of the recent events, buoyed by an over-enthusiastic December risk-on rally in the face of limited evidence of a material acceleration in global growth. A similar pre-emptive – and ultimately unsustainable – move occurred ahead of both the expected loss of Iran supplies in October 2018 as well as in the immediate aftermath of the Abqaiq attack”
    However oil stocks may be a buy here…

    GS: The end of negative earnings revisions for big oil

    In our (GS) 2019 Big Oils outlook we highlighted 10-20% consensus earnings downgrade potential, driven by three near-term headwinds: lower oil prices, lower LNG prices and weak downstream margins. We believe that all three headwinds have now run their course and see a brighter outlook for the sector in 2020:

    1) consensus (Bloomberg) oil price expectations have re-set lower and now sit $3/bl below the 2020 forward Brent price, with strong fundamental support, driven by the end of non-OPEC growth

    2) we believe weaker LNG prices are now factored into consensus expectations and expect the market to improve over the longer-term, as the last projects of the 2010-14 construction boom ramp-up this year

    3) downstream margins have troughed, in our view, with the IMO regulation providing support to complex refining margins in 2020, as shown by the recent widening of light-heavy differentials

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