Amrita is one of the most accurate oil forecasters I've come...

Amrita is one of the most accurate oil forecasters I've come across. If she's extremely bullish, so am I.

Goldman stands to rake in BILLIONS this year on hedges averaging around 70-80 USD from the NA producers. It's a massive windfall for them. For example, the company I spent studying yesterday, Ring Energy (Texas-based producer but similar margins to us), paid $30m of hedging costs out of $68m of revenue last quarter (!!!!!!!). P.s. never mind that it's EV (cap + debt) is currently A$1bn, or 7x Calima, producing just 2x more, and has no Montney acreage for monetisation (which suggests CE1 is worth $70c + Montney).

Anyway, of course Goldman will low ball forecasts, it pays well. Think of all the hedges they will put in place then and rake in from nervous producers when prices are at $150+

If you index the previous peaks in oil price to inflation, we should be targeting $150-200. Don't forget to throw in issues around the amount of net draws (net of SPR drawdowns), severely low number of DUCs, the likely low grade nature of inventories, drilling & exploration has slowed dramatically, and that OPEC is now openly admitting that they are near production capacity (which has not been the case EVER before.......). This is the biggest and most severe oil crisis we've ever had. $130 oil is the top? I wouldn't bet on it.

To now the US government thought a slow down in their economy, and therefore other major economies would reign in prices. Prices have only risen while the previously high GDP forecasts has fallen off a cliff (werew like 7% and they thought a recession was 2 years away just 6 months ago, but US is probably already in one). So why isn't oil falling? They're realising that's the dumbest solution as its held back investment even further.

The last two times we've had oil prices going absolutely nuts and then bust we also had investment in new production at record highs just before the economic slowdowns causing a glut thereafter, and also substantially higher and steady levels of the SPR reserve. Neither is the case here

The shortfall in supply is currently about 5% of US consumption which is relatively enormous (1mmbbl/d). The pace of draws from the SPR has NEVER been this rapid. The SPR balance, which is on track to hit 40 year lows in a few weeks still needs to be replenished by the amount of approx. 10x of total daily demand to get back to the 5 year average. That's a massive tailwind of buying support for oil.

It's a matter of realising that there will be no glut of oil coming what ever they do with the economy......

All this means a major REVERSAL of political tactics is coming. Instead of trying to destroy demand for oil, they will look to boost supply, but dress it up as a windfall tax on the producers (most will be rebated through production incentives). See previous post.

I think I am starting to see what Glenn and Jordan see. Rejecting $120 WTI hedges may not be insane after all!