Super-Spiked Videopods (EP67): Lagging Oil and an Evolving Industry Structure

WATCH the video on Substack by clicking the play button above or on YouTube (here).STREAM audio only on Apple Podcasts (here), Spotify (here), or your favorite podcast player app.This week we will have some fun with Bloomberg charts as it relates to the crude oil macro. We noted in our The Good, The Bad, and The Misunderstood Amidst Major Macro Cross Currents written post from two weeks ago (here) that crude oil remains a critically important energy source albeit with conflicting cross currents that are both bullish (US shale maturity tailwinds) and bearish (China slowdown headwinds, OPEC+ supply increases). Whatever one’s view of oil, it is still a huge driver of sentiment toward the energy sector and of course Energy’s weighting in the S&P 500 is driven by the largest oil and gas companies like ExxonMobil, Chevron, etc. One thing is clear from all the charts, oil looks inexpensive to gold, copper, and refining margins and is at the low end of its recent band to Henry Hub natural gas and TTF. Oil is the big laggard and it is casting a pall on Energy’s S&P 500 weighting, which has sunk back to a dismal 3% of the S&P 500 versus a Russia-Ukraine high of 5% and its pre-2015 range of 8%-12%. The question is whether oil and oil equities are values or value traps. As a spoiler alert, we are not sure we are actually going to be able to definitively answer that today, and the answer in part depends on one’s time horizon. The short-term looks to be more challenging, whereas over the long run we do not believe “the end of oil” is anywhere near. To be clear, over the remainder of this decade, we are more optimistic on growth in power generation—US and global—natural gas demand and for that matter other power generation energy sources like solar + batteries and non-OECD coal. Equities favorably exposed to those trends should perform accordingly. But for the Energy sector broadly speaking to regain a much larger S&P weighing, oil is still the king. 🔔 4 Ways to Subscribe* All Content: If you subscribe to Super-Spiked via email, you will receive all content to your inbox and it is also all on the Super-Spiked website. I have been aiming to publish about once a week, usually on Saturday.Subscribe to Super-Spiked to receive all content via email and directly interact with me. Also available at https://veriten.com.* Veriten: You can now also subscribe to Super-Spiked content via the Veriten website (here) and also receive Veriten’s flagship COBT video podcast.* YouTube channel for video only: You can subscribe directly to the video feed ofSuper-Spiked Videopods on my YouTube channel Super-Spiked by Arjun Murti.* Apple Podcasts, Spotify for audio only. You can subscribe directly to the audio only feed on Apple Podcasts, Spotify or your favorite podcast player app. The podcast is simply the audio for the YouTube videos.⚖️DisclaimerI certify that these are my personal, strongly held views at the time of this post. My views are my own and not attributable to any affiliation, past or present. This is not an investment newsletter and there is no financial advice explicitly or implicitly provided here. My views can and will change in the future as warranted by updated analyses and developments. Some of my comments are made in jest for entertainment purposes; I sincerely mean no offense to anyone that takes issue.📜 Credits* Intro & Outro music: Wolf Hoffman: Concerto for 2 Cellos in G Minor, Rv 531: I. Allegro Moderato.* This episode of Super-Spiked Videopods was edited and produced by Veriten Productions. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit arjunmurti.substack.com