From Sober Look:
Diverging developments in oil markets vs. energy shares
Let's take a look at the recent developments in the US energy markets and the seemingly contradictory reaction by equity investors.
First of all, while we continue to see significant declines in the US rig count (both oil and gas), ...
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| Source: Banker Hughes |
... American crude oil production remains at record levels and still rising. It's going to take time for this momentum to turn.
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| Source: EIA |
Part of the reason is the increasing productivity of new rigs in the US.
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| Source: EIA |
Moreover, outside the US some major oil producing nations such as Russia and Iraq - desperate for hard currency - will maximize production in the months to come. Global production will therefore continue to rise....MORE
The second key development has been a relatively steep crude oil futures curve (contango)....
HT: Abnormal Returns
