Our fund had oil exposure before the event yesterday and it was our hedge on inflation, with the news on the weekend we topped up with an oil etf as we expected residual effects to lift prices as more news came out. Back in late Jan/early Feb Vale had a tailings dam collapse that took 10% of the world's iron ore off line. The iron ore guys rose for weeks after despite recession fears. We expect a similar result with oil.
Iron ore has come off now as production has been restored, so it is a cyclic story. As a footnote Bloomberg ranks/tracks every analysts predictions and the vast majority of analysts tracking Canadian oil and gas stocks in their universe are underwater 30%-40%+ on their predictions over the last 5yrs, so be wary of anyone calling a return to certain multiples/or a price recovery long term, because the reality is multiples have been shrinking for years (even in the US) and Goldman Sachs models shown you need 4mmbbld of demand growth or supply destruction to hit $80/bbl long term. That's a tough proposition when OPEC was holding back 1.3mmbbld as at Friday and venuzuela and Iran were 2mmbbld under capacity.
... But for the next few weeks enjoy the crap out of the old time boom... Doublé meat at Subway... Engaged.
|