VIDEO — Eric Nuttall: Oil in Multi-year Bull Market, Supply Crisis Coming

Is oil in a multi-year bull market?

Supply and demand fundamentals show oil is in a multi-year bull market with a supply crisis in the works.

That's according to Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners. He manages the firm's Ninepoint Energy Fund, which he said was the best-performing energy fund of 2021.

"The risk/reward for me in the sector is incredible," he told the Investing News Network in an interview. "My biggest challenge is everything looks good — large caps look good, small caps look good. Oil looks good, natural gas looks good. Services look good, offshore drilling looks good — everything looks good."

Nuttall said supply-side factors are key for oil right now, and explained that there are three main baskets to keep in mind: US shale, the Organization of the Petroleum Exporting Countries (OPEC) and the rest of the world.

Looking at 2022, he said US shale is no longer experiencing hypergrowth, meaning that production will grow, but will no longer exceed global demand growth. Meanwhile, OPEC is getting close to using up its spare capacity.

"By the end of this year I believe we will exhaust OPEC's spare capacity, and that will be the most bullish catalyst for oil in easily the last decade," Nuttall said during the conversation.

The "rest of the world" category includes major oil producers like Shell (NYSE:RDS.A,LSE:RDSB) and BP (NYSE:BP,LSE:BP), which Nuttall said have invested insufficiently in new production since 2014, and as a result will effectively post no growth until the end of the decade.

In terms of what that means for prices, Nuttall said it's tough to give a 2022 forecast due to variables like COVID-19, but he thinks oil will be "well in excess" of US$80 per barrel this year, with a shot at making it to US$100. Looking out further, he sees a new all-time high of US$140 to US$150 in the cards for oil.

"I feel very confident that we're in a multi-year bull market for oil. Energy stocks, despite the run, still in my opinion represent a generational opportunity due solely to energy ignorance — people frankly are clueless in terms of how oil is used and how long it's going to take to displace," he explained.

"We will all be consuming oil for the rest of our lifetimes, and yet that fear of peak demand is leading to a reality of peak supply. The writing is on the wall: We're heading towards an oil supply crisis."