A Comment -- General Comments From an Expert (A Commentary)

We need to reach an oil price within about a month where you kill demand, because you're depleting stockpiles so quickly. Strategic petroleum reserve (SPR) releases are, at most, 4M barrels per day (but production is down 11M, and flows are down 17M).

There's no policy change you can enact to offset this mismatch. Once the SPR release is over, that's when it really blows up. To restore balance, you have to kill demand. Unfortunately for the global economy, the oil price for that is a shockingly high number of roughly $175 per barrel (when oil price reaches 5.5% of global GDP).

We're using up the safety buffers -- strategic releases, onshore storage, offshore storage. Those are all ending in the next several days to weeks. That's when the paper market will reflect the physical market.

There's all this talk that Trump will TACO this weekend, and everything will go back to normal. There is no normal to go back to. Consensus was that 2026 would face the biggest oil glut in history, and oil would fall to $40. In the next 3 weeks, inventories will go to multi-year lows because we've lost so much production. 

That resets the floor for the price of oil when this ends. He calls this "the day after". What does that look like? It'll take at least 3-4 months to bring back production in the Middle East, even if peace breaks out on the weekend and oil sells off. There will be a long-term $10-20 premium on oil that the world will have to put up with.

His view is that whatever you want your energy weighting to be, you want maximum weight right now. Things continue to get worse by the day, not better.

The worst energy crisis of our lifetimes. In the coming days and weeks, prices of WTI and Brent will need to better reflect reality.

You have to have a macro view -- incredibly challenging for DIY investors. Portfolio managers spend a lot of time and $$ to obtain global perspective. Then you need to decide if you want to be in drillers, refiners, oil, natural gas, etc.

The global LNG perspective has changed dramatically in just the past month. There was supposed to be this massive glut going out to 2029. Now with Qatar being hit, 20% of global LNG supply is offline right now. They say it'll take 4-5 years to rebuild, which translates into 17% of capacity. 

That means the world's lost 3.5% of global LNG for at least the next 4-5 years. Disaster. There's no strategic reserve for natural gas.

He has zero natural gas in his fund. Domestic natural gas fundamentals really eroded. There's too much supply. More oil drilling also produces gas alongside. You want to be all in oil right now.

We need to get meaningfully higher, and the challenge is time. Time is not on our side. Building a 1M-barrel-per-day pipeline to the West Coast takes roughly 8 years.

US and Canadian governments are in discussions about resurrecting Keystone 2.0. Great because the timeline is a lot faster. Not great because it ensures customer concentration risk with the US, and we've been trying to move away from that.

We should be doing both. We're approaching full capacity, which is an issue. Global demand is roughly 106M barrels per day, anticipated to grow to at least 150M by 2050. Meaningful growth in US is over. Non-OPEC production is peaking this year, OPEC has 1.5M barrels per day spare capacity and then they're done.

Where are the necessary barrels going to come from? Only a handful of countries are on the list, and Canada's at the top. We're the only country in the world that can't get out of its own way to build extra capacity. It's economic treason.

The world loses 7M barrels per day of productive capacity due to well decline. The very-well-respected minister of energy for Saudi Aramco has been warning the world for years that it needs to invest more. He can see what's coming, and that was pre-Iran.

We're in an opportunity-rich environment. Almost every oil stock is a Buy today. The value in hiring a professional to help you is that you go from being up 20% on your own, to being up 80-100% or more with a professional manager.

In general, political events have (at best) a temporary effect on the market. The defining political event of his adulthood was 9/11. Yet markets closed higher at the end of 2001 than they did on September 10, 2001. Markets tend to take things in stride and then move on fairly quickly.

There's conflicting information coming out of the Iran situation. Iran is saying they're not having any discussions with the Americans. Trump is saying he's talking to "Top. Men." (just as in the last scene of Raiders of the Lost Ark). Of the two, Brendan actually believes the Iranians; yet the market seems to be accepting the reassurances coming out of the White House.

As the wise New York philosopher, Paul Simon, said, "A man hears what he wants to hear and disregards the rest."

He's pretty heavily weighted in energy, especially Canadian energy, but hasn't trimmed. It would have been really nice if Canada already had in place the business case to get more of our energy to world markets.

As the wags are saying on the internet, "The difference between this conflict and the Vietnam War is that Trump knew how to get himself out of the Vietnam War." 

This will continue on in some way for a bit. Even if it doesn't, the bigger problem for energy prices would be if there was a slowdown in the economy driven by higher interest rates. The president would very much not like rates to ratchet up in the 6 months before the midterm elections. 

The US being able to keep interest rates low is more of a determining factor than whether this war continues on.

Still heavily weighted in energy, especially Canadian. Financial services have been a bit weaker here, but he likes them and they should continue. As for AI, we'll probably talk about some of the most boring companies in the tech sector during his Past and Top Picks.

He worries that oil prices will lead to higher prices for consumers as a tax on spending on necessities and discretionary alike, but this will result in deflation longer term. In energy, he owns bellwether CNQ, but generally one should consider taking prices; this energy spike will pass eventually.

He would differentiate the two that much, but ETFs offer far more liquidity. Now, he isn't surprised to see in Asia a sell-off in oil as well as gold to become more liquid. But this sell-off is temporary noise.

He's not going to cross-check an expert like that who understands the dynamics. Though no reliable sources yet, he expects there's been some damage to Iran's ability to produce. There's enough excess capacity in different parts of the Gulf to offset that, so he's not too worried at this point.

The market's celebrating today with a relief rally that the war isn't escalating, but he suspects there's more to come. The rally may last the rest of the week, until negotiations start. You can also expect the US to be bulking up its presence in the Gulf; this was just a bit of a pause.

Right now, it's a glass half full/half empty scenario. For him, the end goal is about regime change in Iran; the world just might be a better place if we had less terrorism.

A couple of weeks back he reduced exposure in the energy sector, assuming that the spike would be temporary. But recent events suggest it's a bit more permanent.

If we see that December crude oil is starting to trade a lot higher than where it is today, that suggests sustained elevation. We're not seeing that yet, but something to keep an eye on.

Oil and gas are big inputs into everything. Transportation is the obvious one. When you raise the price of gas at the pump that's $$ that literally goes up in smoke, leaving less discretionary income for the consumer to spend. Restaurants, clothing, you name it.

Discretionary income is what will get hit if this is a more permanent thing. He doesn't think it will be, but it's going on longer than the couple of weeks initially thought. Could easily be several more months.

The extent to which the US has mitigated Iran's military and missile capability is still being debated.