I’ve been very up front on oil from the day Biden became president. It was a no-brainer that oil could benefit the most from the agenda Biden and his team was outlining much before he was elected. Since then oil has doubled.
The best opportunity to buy oil again was last week. On one day last week the energy sector (XLE) was the only sector that was red in the S&P 500. We again highlighted that this was a golden opportunity to buy oil. Yesterday oil roared back up almost 4%. Why am I so confident?
It is very simple. There are more buyers than sellers. On a serious note there will not be more investments going into fossil fuel developments. At least not in the developed countries. Very soon there will be new legislation and punishments against those who will develop new businesses that will harm the planet earth. So the existing ones will thrive until new technology EV vehicles and other renewable energy becomes main stream.
The focus in the oil market has been all about future demand - meaning less demand, driven by the fantasy of rapid change to ubiquitous electric vehicles, wind and solar farms. Thus the world has underestimated the economic impact that is coming down the pike from regulating away supply (from the environmental activists).
The recent fall in Bitcoin explains this a bit. The fall in Bitcoin started with Elon Musk’s bizarre comment on not accepting Bitcoin as payments for Tesla despite he owning a chunk of Bitcoin. Why did he do that? Elon has been the champion for environmental friendly products. He has been the poster boy for EV plus environmental and climate friendly movements. He had also received huge concessions from the govt for his initiatives. So he was contradicting himself if he supported a payment system that eventually was causing a lot of carbon emissions.
China’s timely intervention to ban Bitcoin mining was also a catalyst in Bitcoin’s fall. This was not the first time they did this but the third time. In the past two times also Bitcoin fell sharply and at one time to the tune of more than 80% but both times it rose much higher than its fall. We believe the story will be the same this time as well.
What about oil? I think it is headed to $100.
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.
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