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From glut to scarcity: crude price outlook brightens rapidly

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

The oil price has stabilized near the $49 level and saved-up bullish forecasts are popping up everywhere. The central investment thesis is that industry investment in new discoveries and development collapsed in 2015 and 2016 and this paves the way for an eventual supply shortage that will see crude prices soar once again,

"With oil prices hovering around $50 a barrel, current project spending is focused on "short-cycle" projects involving U.S. shale deposits, Daniel Jaeggi, president of Mercuria Energy Group Ltd., said at the FT Commodities Global Summit in Lausanne, Switzerland, Wednesday. Hedging activity by these same producers is keeping future prices low until 2020, which is dissuading investment in major oil projects, he said. "We are sowing the seeds for potential instability in the future and more volatility, " Jaeggi said. In three to four years, "you won't be able to satisfy demand with short-cycle barrels.""

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The huge Cenovus/Conoco Phillips deal is the big energy story domestically. I am viewing this as a bullish sign for the industry – Canadian companies have been generally brilliant at picking spots to buy and sell assets to and from foreign companies.

"Oil Traders Warn There's a Supply Crunch Looming" – Bloomberg
"Crude Oil Prices Rose above the 200-Day Moving Average" – Market Realist (warning: I don't know this site well)
"Cenovus snaps up ConocoPhillips assets for $17.7-billion" – Report on Business
"ConocoPhillips sells oil sands assets for $13.3bn" – Financial Times
Counterpoint: "IEA's Birol Expects U.S. Oil, Shale Production Boom" – Bloomberg

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An important Bloomberg column warns that high-yield stocks are not always entirely good things, particularly where U.S. retail stocks are concerned,

"In a world where the benchmark 10-year Treasury note yields just 2.4 percent, these dividends can look pretty appetizing for yield-starved investors. The questions investors must ask themselves are the following: Are these beaten down retailers diamonds in the rough or value traps? Am I being paid to wait or are these dividends going to get cut in the future?"

"Don't Be Fooled By High Dividends on Retailer Stocks" – Bloomberg

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I was going to put this story in the Diversion category until I realized its importance for investors. Harvard Business Review answers the question, "How to Spot a Liar,"

"Want to know if someone's lying to you? Telltale signs may include running of the mouth, an excessive use of third-person pronouns, and an increase in profanity. These are among the findings of a recent study that delves into the language of deception, detailed in the paper Evidence for the Pinocchio Effect: Linguistic Differences Between Lies, Deception by Omissions, and Truths, which was published in the journal Discourse Processes."

"How to Spot a Liar" – Harvard Business Review

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Tweet of the Day: "Lose yourself in this beautiful literary map of London" – Twitter

Diversion: "Why are there no lawyers on Start Trek?" – Current Affairs

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More

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