A prominent Canadian energy expert shared a nuanced approach on oil, cautious over demand dropping to normal levels but anticipates a surge in prices next year.
Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners said he is bearish on oil in the short term but bullish for the long term. He has natural gas as a better play for the next six months and will rotate back to oil in 2026 anticipating demand to increase.
“Over the next couple of months, we’re very, very bullish,” Nuttall told BNN Bloomberg in an interview. “At some point in 2026 we think the seeds have been sown for the next major bull market in oil.”
As of Wednesday afternoon, WTI was hovering around $US63 per barrel while Brent was trading at $66. He said oil stocks at $60 are fairly valued.
The Organization of the Petroleum Exporting Countries (OPEC) continues to boost oil production distributing more than 500,000 additional barrels per day in August as it tries to regain production inflating prices for the meantime.
Sanctions from the United States on Russian oil have also placed a premium on oil preventing traders from wanting to go outright bearish.
Nuttall said he anticipates normalization in U.S. shale production and spare capacity from OPEC. He also looks towards facilities in Guyana and Brazil ramping up production to balance the market.
“We have a surge of OPEC production between now through September,” Nuttall said. “We’ve got the normalization and the end of that voluntary deal. That’s 1.2 million barrels per day that the market is having to absorb. There’s been a mismatch between the increase in production from OPEC in the increase in exports, because during the summertime, a lot of countries, namely Saudi burn oil for air conditioning. Well, that’s coming to an end.”
He expects an increase in exports that the market has to absorb. He said projects are coming online in Guyana and Brazil that amount to about 650,000 barrels per day at full capacity.
An Exxon Mobile-led consortium began production at a fourth floating oil vessel in Guyana bringing total capacity from the oilfield to over 900,000 barrels of oil per day. BP meanwhile made its biggest oil and gas discovery in 25 years off the coast of Brazil.
He expects significant inventory to build, starting in September due to increased production but seasonal refinery maintenance reducing demand.
“There’s bookends on either side, but we think that we’re facing very, very significant builds in inventories beginning in September and really manifesting themselves in late fall,” said Nuttall.
He sees better opportunities in natural gas right now, highlighting Expand Energy as a top pick trading at 14 per cent free cash flow and a 3.4 per cent dividend.
With files from Reuters
