Has STO's uptrend broken down?, page-14

@equityma

sorry - can you restate your first question? its phrased in a way that makes your point unclear.

i think you are saying 'how could there be a washout of production if rig rates arent rising strongly'. That actually doenst make much sense - and it isn;t what I said,

PoO is not strongly related to equities. All commodities have a fairly distinct behaviour thats quite different from the big multi asset class indexes

There is some correlation in so much as high economic growth can mean both strong profit and high oil demand. But that certainly isnt the case at the moment. Its a correlation i would put at best around 0.45. Its something to consider - but its not causal.

As for oil stocks - soemthing you also need to understand is just how massively overpriced oil stocks are. 100 years of cars has taugh investors to think oil is the one indispensiable commodity - and as a result even in sellloffs - oil stocks have never approached the valuation levels such as gold miners were at last year.

Currently in the US the oil sector is on a 97x forward p/e (or it was when i check 2 weeks ago).

STO is likely on about 25x forward pe atm.

So if oil does dip hard again - the sector selloff could be really something - depending on whether a 3rd big dip would finally cause capitulation

But anyway - for now - Im just investing on the evidence that says the glut will worsen during remainder of this year - and then picking the stock I think is worst positioned in that case.

If thats changes Ill change my view