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Quarter-End Insights

Our Outlook for Energy Stocks

Venezuelan oil politics loom large within the energy sector today.

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  • Oil prices have remained in a tight range over the past few months, despite a surging oil supply picture in North America, which has been offset by supply cuts by Saudi Arabia and the negative impacts of tough sanctions on Iran. In addition, new data points from China and Europe suggest that we're simply circling in a holding pattern regarding oil supply and demand, keeping Brent prices in a tight range over the past few months.  
  • Chavez's death creates uncertainty around Venezuelan oil policies. While we think Chavez's hand-picked successor, Nicolas Maduro, will succeed him, little else is clear. There's a potential fat-tail opportunity for ExxonMobil and ConocoPhillips to perhaps regain access to some lucrative assets that were nationalized in 2007 in exchange for much-needed capital. It remains to be seen if Venezuela is willing to accept the likely tough terms offered by the majors.  
  • The domestic natural gas picture is improving. Natural gas production growth has begun to flatten, with declines likely in the next few quarters, thanks to a dry gas rig count that remains at its lowest level since the late 1990s.

 

Stephen Ellis does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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