The last bearish overhang for crude - Venezuela - is now gone. Why one trader says oil will follow in gold's footsteps.

By Barbara Kollmeyer

Kevin Muir says the oil industry is severely underfunded

Underinvestment in the energy sector is a big reason to bet on oil, says Kevin Muir.

Roughly a year ago, U.S. crude was marching toward $80, but it's been barrels down a hill since then.

Based on a recent poll of dozens of analysts and economists by Reuters, the average forecast for oil prices (CL00) sits at $58 a barrel for 2026, not far off current levels, amid an ongoing a supply/demand imbalance.

But last year also brought commodity surprises, such soaring precious and other metals. Our call of the day from Macro Tourist blog author and former institutional trader Kevin Muir says it's energy's turn now and he's buying.

"The Russian invasion of Ukraine proved to be the right time to sell oil. Now, almost four years later, the American takeover of Venezuela is the opportunity to buy it back," he said.

"One of the last remaining unfulfilled tenets that energy bears have focused on was the overhang from a perceived Venezuelan production ramp. With that 'worry' now realized, I think it's 'sell the rumor - buy the news' time," said Muir.

Apart from geopolitics, he sees oil destined to cycle like other commodities such as uranium, gold, recently silver and probably copper is next.

It starts with weak prices that make it tough for producers and uninspiring for new investments. As the overhang is eventually worked through, prices start to rise and the market wakes up to a lopsided demand/supply situation from that very underinvestment. Finally, investors chase the commodity higher, and equity prices follow leading to a bigger-than-expected squeeze, as short sellers are forced to buy back positions that only drives prices up further, he said.

Muir last year did advise buying gold miners GDX, and one ETF tracking them has soared 157% over the last 52 weeks.

He flags a chart from Topdown Charts showing how oil has been the most neglected among commodities when it comes to capital investments:

He also pointed to observations from Schachter Energy Report's Josef Schachter, who late last year forecast crude will reach $80/barrel this year. The energy veteran expects non-OECD countries will drive up demand, with an industry transition to green energy also requiring more fossil fuel.

Adding to this, Muir observes that the world, led by President Donald Trump, is starting to embrace sustained fiscal stimulus. "No need to overthink it. It's no wonder gold, silver, and copper are ripping higher. Global growth will surprise to the upside. The shock would be if oil doesn't follow higher like the other commodities," he said.

As for his timing, Muir sees risk/reward for long crude positions better than a year ago when near-month futures contracts were trading at big premiums to further-out contracts. He said while OPEC's 2024 announcement that it would boost production lowered near-term crude prices, longer-term prices barely budged "because the long-term story hasn't changed." In other words, under-investment and prospects for rising supply are anchoring prices further out.

Getting at the energy gloom, Muir notes that at its peak in 2006, the energy subsector was 16% of the S&P 500 SPX, but is currently less than 3%. Pricing energy stocks using cashflow, he finds that ratio hasn't changed in the past few years, hence they're not expensive. The State Street Energy Select Sector SPDR ETF XLE has traded sideways since 2022, he notes.

Muir says it's not a bad time to own XLE, but also sees an opportunity in Canadian energy names, which sold off on Venezuela headlines as that country represents heavy crude competition. "The XEG Canadian Energy ETF CA:XEG completely separated from the American XLE . This is a massive overreaction."

"The entire world is fiscally stimulating. One by one, commodities are ripping higher as the lack of investment over the past decade finally catches up. Oil will be no exception," says Muir.

Read: Why U.S. oil refiners could be the big winners in Venezuela - even if its actual reserves disappoint

The markets

U.S. stocks SPX DJIA COMP are inching higher, with silver (SI00) leading precious metals lower, and crude (CL00) softer.

   Key asset performance                                                Last       5d      1m      YTD     1y 
   S&P 500                                                              6944.82    1.45%   0.84%   1.45%   17.35% 
   Nasdaq Composite                                                     23,547.17  1.31%   -0.45%  1.31%   20.89% 
   10-year Treasury                                                     4.163      -0.90   0.80    -0.90   -54.30 
   Gold                                                                 4456.3     2.86%   4.65%   2.86%   66.27% 
   Oil                                                                  56.23      -2.06%  -4.63%  -2.06%  -23.31% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

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The buzz

Showing mild improvement for jobs, private-sector payrolls for December rose 41,000, following a revised 29,000 drop in November.

The Institute for Supply Management's services index is due at 10 a.m., along with job openings for November and October factory orders.

Oil prices slipped after President Trump said Venezuela will send up to 50 million barrels of oil to the U.S.

Strategy stock (MSTR) is rising after MSCI decided not to exclude digital-asset treasury companies from its indexes, with BitMine Immersion Technologies (BMNR) also getting a lift.

GameStop (GME) is rising after the video-game retailer and meme stock announced a performance-based stock award for CEO Ryan Cohen.

Ventyx Biosciences stock (VTYX) is up nearly 60% after The Wall Street Journal reported that Eli Lilly (LLY) is nearing a $1 billion deal for the biopharmaceutical.

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The chart

Jones Trading/Bloomberg

The chart flagged by Jones Trading's chief market strategist Mike O'Rourke shows the "massive valuation gap" that's been growing over the past five years between unloved smaller cap indices, such as the S&P 400 Mid Cap index MID, and the S&P 500 itself. The first few days of the new year have seen a rotation underway, such as an outperformance of the Russell 1000 Value RLV against its growth RLG counterpart, which continued on Tuesday, he noted. While the moves thus far are mere "blips" against those big valuation gaps and recent years have seen "plenty of false starts," if the rotation continues, "there is a vast valuation chasm to close," he said.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   TSLA    Tesla 
   NVDA    Nvidia 
   TSM     Taiwan Semiconductor Manufacturing 
   MU      Micron Technology 
   GME     GameStop 
   PLTR    Palantir Technologies 
   MSTR    Strategy 
   AMZN    Amazon 
   AMD     Advanced Micro Devices 
   AAPL    Apple 

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-Barbara Kollmeyer

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01-07-26 0949ET