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DON'T TAKE YOUR EYE OFF ENERGY!

ENERGY PRICES MAY BE HEADED HIGHER, EVEN IN A SLOWING ECONOMY

Click All Charts to Enlarge

1- SITUATIONAL ANALYSIS

CLEAN ENERGY

Let me be clear about where I stand on the following before you ignore this week's comments on opportunities in the field of Petroleum supply.

1. I support the systemic and structural move to sustainable clean energy,
2. I am skeptical of the fear mongering about the realities of the rapid destruction of clean burning Fossil Fuel in the pursuit of an urgent 'war' to combat Climate Change,
3. I am against the current US Energy Policy of Energy Dependency through an unrealistic & naive time-line of Fossil Fuel termination,
4. I support a technology focus on a balance of Nuclear Fusion & SMR Natrium for Power Generation, Hydrogen Fuel Cells for transportation, clean burning fossil and a full spectrum of supporting wind, solar and tidal technologies for economically sound applications.
5. I believe the above should all be based on cost and efficiency savings and not on ideological central regulatory edict

There are tremendous investment opportunities in the petroleum industry not just for energy but the 72 industrial sectors dependent on it ranging from cosmetics to plastics. When electricity generation is soon found to have been crippled by the current US Energy policy, prices will sore and the public will demand answers - not platitudes and empty philosophies!

ENERGY COMPLEX

Few have noticed that commodities have been the best performing asset since the May 31st US debt ceiling resolution! The 2020's secular buying catalyst was supply driven by US aniti-fossil fuel government policy, while the 2023 catalyst so far has been about the delayed recession.

Lately it has been increasingly about the growing belief in a "soft landing". However, the recession is coming which historically meant that undervalued assets with profits will perform better.

The chart to the right illustrates, US crude Inventories are presently at their lowest level since November 1985! This will mean petroleum supply is likely to increase in value since even a slower economy requires what petroleum delivers - electricity generationa and raw materials for the 72 dependent industries. The low inventories are thanks to President Biden intentionally draining the US Strategic Petroleum Reserves (SPR) thereby sending US oil inventories to the lowest level since Nov'85.

Meanwhile as shown below, energy stocks are still trading at historical relative lows.

SAUDI ARABIA CUTS IS DRIVING THIS LIFT IN CRUDE

There is a major Geo-Political battle presently raging as Saudi Arabia has rejected the US foundation for the original need for the creation of the Petrodollar (which was the central issue for inflation in the early part of the 1970's) as Saudi Arabia has now actively aligned itself with the BRICS against the US and US Dollar.

The Saudi Press Agency is reporting:

An official source from the Ministry of Energy announced that the Kingdom of Saudi Arabia will extend the voluntary cut of one million barrels per day, which has gone into implementation in July, for another month to include the month of September that can be extended or extended and deepened.

In effect, the Kingdom’s production for the month of September 2023 will be approximately 9 million barrels per day.

The source also noted that this cut is in addition to the voluntary cut previously announced by the Kingdom in April 2023, which extends until the end of December 2024.

 The source confirmed that this additional voluntary cut comes to reinforce the precautionary efforts made by OPEC Pus countries with the aim of supporting the stability and balance of oil markets.

The biggest question currently in the oil markets is how long Saudi Arabia will extend its 1 million-barrel-a-day supply cut. Riyadh’s handling of a previous strategy offers some guidance -- and reassurance -- for crude bulls. It will be drawn out but eventually taken away for higher prices.

With the overall US equity markets stretched from a valuation perspective it now appears to be a good idea to keep a close eye on Energy if the markets were to pull back further as a result of weakness in the overall equity markets. An opportunity may soon be at hand to position your portfolio for the Longer-Term in an undervalued energy sector.

ENDING DIAGONAL CONSOLIDATION

Though energy appears to have broken out from its' downward trend, there is still a possibility of the sector wanting to test the prior lows once Saudi Arabia resumes the production of the current 1 million barrel-a-day supply restriction.

TECHNICAL ANALYSIS

Not: The Elliott Wave Count used below is that of MATASII.com for the WTIC CFD's but those counts are labeled as within the larger construct developed by the widely followed Technical Indicator Index.

WTIC

MONTHLY - cfd

There is a possibility that the Saudi cuts may move WTIC to the 24 MMA (shown below) at approximately $85/bl..... or higher if the cuts are sustained or increased.

YOUR DESK TOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

WEEKLY - cfd

The Weekly chart suggests the possibility of a move slightly higher towards the 80 WMA at ~$88/bl before pulling back.

YOUR DESK TOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

DAILY - cfd

The Daily chart suggests that in the short term WTIC may face overhead resistance but after some further consolidation a move towards intermediae term overhead resistance at ~$94/bl is a possibility.

YOUR DESK TOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

All of these possibilities should be monitored in the assessment of determining when to begin developing an Energy positioning. We discuss the reasons for this in this week's newsletter entitled "Fitch's Downgrade a Vote of Non-Confidence in Bidenomics!" Gold, Energy and Commodities have historically proven to be protection against an eroding US Dollar.

COMMODITIES

The Food and Agriculture Organization of the United Nations (FAO) this week warned of Food prices again rising. =With rising Food prices coupled with ongoing relative strength in Energy, the overall Commodity Sector may be worth consideration on any equity market weakness. It has been the worst performing sector in 2023. (see circle below).

IN 2019 WE CONCLUDED WE WOULD SEE A COMMODITY SUPER CYCLE IN THE 2020'S

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