Schachter Eye on Energy: A pause in the trade war keeps energy prices stable for now

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Each week Josef Schachter will give you his insights into global events, price forecasts and the fundamentals of the energy sector. Josef offers a twice monthly Black Gold newsletter covering the general energy market and 34 energy and energy service companies with regular updates. He holds quarterly subscriber webinars and provides Action BUY and SELL Alerts for paid subscribers. Learn more and subscribe.

EIA DATA: The stock markets and crude oil bounced as China and the US are moving forward with talks in October. This has been confirmed by a Chinese spokesperson, although it differs from last week’s singular comments by President Trump. WTI has recovered to nearly US$57/b despite a mixed EIA report. Commercial stocks fell last week 4.8Mb compared to an estimate of a decline of 2.5Mb. US domestic production fell 100Kb/day to 12.4Mb supporting higher crude prices. Net imports rose 934Kb/day to 3.84Mb/day. Now that we are past the Labour Day long weekend, demand should weaken and inventories should start building in the coming weeks. Last week demand fell 588Kb/day from 22.2Mb to 21.6Mb. Over the next month consumption should fall below 20Mb/day and inventory builds of 5Mb+ per week should occur. Crude oil has rebounded $3/b over the last week due to the more positive China trade comments and short covering. We continue to believe that as inventory build-ups are reported by the EIA in the coming weeks, WTI will retreat below US$50/b before the end of September.

EARLY OPEC DATA: Early reports from OPEC indicate that Saudi Arabia and Nigeria have increased production above the prior month. If so, this could accelerate the decline into month end. The S&P Bullish Percentage Index remains high (28.6% last Friday) which supports the view that there is more downside pressure ahead.

The Schachter Energy Conference General Admission tickets are now all sold out with a wait list. There are still VIP tickets available. If you would like to attend book now as we anticipate being sold out soon.

CONCLUSION: We expect crude prices to fall during September and October and for the S&P TSX Energy Index to fall below 110 (Friday 128). Bottom line: We may see a double bottom first in October and then again in mid-December when tax loss pressure will once again be painful. Hold cash for now for a great buying opportunity soon.

The 2nd Annual Schachter Catch the Energy Conference will be held at Mount Royal University in Calgary on Saturday, October 19th. This is a rare opportunity for investors to learn more and interact with 26 Energy Sector CEOs. Below are the 26 companies presenting at the conference.