Will the US Energy stocks rally hold or fall apart?

Despite the mini buying frenzy since Tuesday morning on the NYSE, the US energy sector is in a secular bear market, down 52% YTD. There is no credible prospect of a new OPEC deal or a fall in US oil inventories on the horizon.

Though dozens of North American shale oil drillers will to bankrupt, the fall in US output will take time while the demand shock from a global recession is atleast 12 MBD.

The 20% rebound in the SP500 Energy ETF (XLE) is not sustainable. OPEC and Russia cannot handle a 10 MBD supply glut in a 100 MBD global wet barrel market. Ultimately, only Chevron, BP, Shell, Total dividends are safe (for now) as these Seven Sisters slash capex/costs.

Matein Khalid is the Chief Investment Officer of Asas Capital Management. He has 25 years of experience in international capital markets as an advisor to family offices and fund managers. He has worked for investment banks/hedge funds in New York, Chicago, London, and Geneva. In addition, he has been the CIO of a technology fund in San Francisco, a royal investment office in Dubai and a public insurance company listed on the DFM.