Unprecedented Oil Volatility → Stay Away From The Narratives

In this clip from a recent episode of The Macro Show, Hedgeye CEO Keith McCullough and Director of Research Daryl Jones discuss the unprecedented levels of oil price volatility and explain why we are in no rush to go bullish on oil based on narratives.

[jamesruscheinski]

Good advice to stay away from narratives. Seems to be a few incomplete narratives going around that do not capture the big picture. Keep good info coming.

[bboucharde]

Keith & Daryl, YES. I accept your key point about the correlation of high VOL with low crude prices---based on history. But the counter to that is based on these factors: (1) Rig counts in the US are plummeting; (2) marginal E&P companies will go bankrupt, along with many frackers; (3) $billions in junk bonds sold by frackers will become toilet paper; (4) world oil demand will recover faster than you think; (5) super-major oil companies with strong financials will prowl the oil patch and eat the sick weaklings; (6) US daily crude production could be 3 million BPD lower in late 2020 than now; (7) Trump will move mountains to reduce layoffs among the super-majors----whether we like it or not.

By the time you guys get around to liking the super-majors, the train will have left the station.

[mattlangstraaat]

Its ok to be ... interesting.. please dont hold back... i enjoyed this... [newer sub]

[benfranklinskite]

Energy stocks are dirt cheap right now. No need to buy an oil futures contract. Yes, shale companies will go bankrupt, but oil will retain its crown as the biggest energy bang for the buck for decades to come and energy companies will profit from it. What other equities are this cheap and will pay the dividend energy is still paying? Buying and holding is still a strategy. Demand will increase, oil will revert to the mean, and volatility is everywhere right now. 10 years from now, I'll be glad I bought energy stocks. Active managers hate this approach, especially when I tell them I bought into a low cost ETF.

[AdemTumerkan]

Instead of focusing on the oil volatility, I’d rather focus on the capital cycle (supply side) which is indicating much more downside (i.e. neg. asymmetric) in oil

Putting it simply ~ not enough marginal supply has gone offline + lower oil price w/ massive outstanding debts = more output need to make up for lost revenue; ~ EX: $60 oil per barrel to $30 means producers require 2x more output just to generate same revenue = even more supply)