"I think within the next year we'll see an (inflation-adjusted) all-time high in oil prices," said Eric Nuttall of Ninepoint Partners.
Eric Nuttall: Oil Bull Market on Fast-forward Due to Russia/Ukraine Waryoutu.be
The war between Russia and Ukraine is undoubtedly a key factor in the oil industry right now.
But as Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners, reminded investors, a structural bull market was in place for oil long before the fighting began.
"We were already in a structural bull market before the conflict broke out, and what this is doing is it's fast-forwarding us arriving to the inevitable conclusion," he told the Investing News Network.
"But it's also creating more of a bullish undertone," Nuttall added. "Because now we are impairing the productive capacity of one of the biggest oil producers in the world. (Looking at this purely as an investor), we did not need a conflict in Ukraine with Russia to be putting us into one of the most powerful bull markets in modern history."
With sanctions impacting the movement of Russian oil supply into the market, a key question is which nations may step to fill the gap. Nuttall pointed out that beyond the complex logistics of ramping up production, companies and their shareholders may not want to do so given that they are only just emerging from a bad bear market.
"How do you justify growing when the best investment with your cash flow is to make it free cash flow and then use it to buy back your own stock?" he questioned. "And so there's a mismatch between what the administrative wants out of job preservation and what the owners of shale companies want."
Looking forward into 2022, Nuttall expects more volatility in oil prices. "My conclusion for where we are today is we are drawing from storage globally when we should be putting it in. Demand is going to surge because of seasonality and the pickup in leisure travel business by the summertime," he said. He also expects further restrictions on Russian oil, which he sees aggravating undersupply and low inventories.
Ultimately, Nuttall thinks oil prices will get high enough for long enough that they will destroy demand. The level that will happen at is tough to predict, but he anticipates that it will be meaningfully higher than US$120 to US$130 per barrel. "I think within the next year we'll see an (inflation-adjusted) all-time high in oil prices," he concluded.
Watch the interview above for Nuttall's thoughts on the factors at play in the oil space right now, and what could be next for companies and prices.
Don't forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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