Eric Nuttall

Investors are disappointed at $70 oil, and they should be. He had more bullish expectations coming into this year, with biggest disappointment being Chinese demand. Very few people would have forecast Chinese demand to be negative YOY for a couple of months. Thankfully, there are signs that it's now inflecting. One big energy trader believes that Chinese demand will be up 700k barrels per day next year.

It's kind of a moral victory. His call is that global oil inventories (his measurement of the balance between supply & demand) would hit all-time lows. And we're there today, which is great. Global inventories are at their lowest since at least 2017, US inventories are at the lowest since 2016.

In the olden days, used to be a very strong relationship between inventories and the oil price. As inventories fell, the price would go up. Today, looking at where oil "should" be, it should be about $81 WTI. But it's trading just under $70. There's a disconnect.

Why the disconnect? Market's concerned about 2025 and peak demand being right around the corner, demand weakness continuing, US shale surging, other countries like Brazil coming online, and OPEC ramping up to maintain market share. He feels that the market's a little too bearish on demand, US shale production is flat (Trump will see peak production over the next couple of years, a huge event). Plus, Trump will be ultra-hawkish on Iran exports, giving OPEC the chance to add barrels eventually, which will be the beginning of normalization of OPEC's spare capacity (not as high as people think). 

Demand is fine. Just look at the US economy, which is going like gangbusters. Supply expectations are too high. Market is tighter. Between $70-80 is reasonable over the next 12-18 months. You need Saudi to bring some of those barrels back to market.

He remains very bullish on the outlook. There can't be an energy transition when the demand for oil, nat gas, and coal continues to make all-time highs. Governments and organizations basing their constant negativity on ignorance warps sentiment about investing in energy, which translates into the valuations we see today.

Tricky. In penalty box based on disastrous year. Dividend needs $80 to be truly sustainable. Based on poor share performance, CEO's job may be on the line. Risk in Colombia, sentiment remains challenged. He owns a very small position, gathering option premiums. Better names out there for new $$.

Sentiment remains challenged in the space (a common theme today), even though the Energy Index is up about 20% YTD. People are hiding in large caps, with few funds coming to small- or mid-caps. Hard to see it outperforming. Yield is 10.7%, pretty hard to replace. Not a name for new money.

Look at his Top Picks today, and then decide if you want to let this go for tax-loss selling. 

Comes down to what you're trying to achieve. A sleepy, not-get-rich-overnight name. He's happy to collect the yield of 7.6%, well funded down to about $50 WTI. Eventually, you'll get modest upside relative to commodities going up. Trades at half the valuation of PSK (he doesn't understand why).

Excellent company. Trades at 18x cashflow. FRU is cheaper at about 9x.

Has it in his main fund and his income fund. Pure-play Bakken producer. Off the radar of US institutions, as it's just too small for that market. Vast majority of free cashflow will come to shareholders as buybacks, and over time this will drive a re-rating. An opportunity for very good upside.

On his radar, but liquidity in the stock is very poor. Float is too small to buy a large chunk of shares. Likes its focus on the Montney and the oil sands (a national treasure). Loves long-dated assets and their quality. Meaningful leverage to rising oil.

Huge disappointment, not operationally but on the share price. Typifies an out-of-favour stock:  Canadian mid-cap with hair on it. Last quarter had no hair, beat expectations, paid down debt, generated lots of free cash, bought back stock. Deep value, mispriced, too cheap to sell. He's waiting, but patience is being tested.

Tricky. Natural gas stocks have been on a tear the last few days, super hot, on fire. Extension of the Trump presidency. Certain investors are feeling FOMO if they don't own energy. Valuations are still compelling.

Thematically, he's bullish gas. Still exposed to weather, and though it's been warm up till now, there's a cold forecast. Gas can be volatile, so these names can be more volatile than oil. This name has lagged, and that could unwind. Doesn't love the variable dividend; instead, should be buying back stock. Good company, lots of inventory. But tactical timing is tricky.

Almost no interconnection. Main uses for oil are not for power generation. Natural gas and, long-term, nuclear tie into AI. The buildout of AI and data centres is real.

In the US, power demand was flat for 14 years; this is the first year with an incline. If demand in the US is expected to grow by 25% by 2040, where will the power come from? What about nuclear? Well, it makes a lot of sense, but you'd have to build 126 reactors, and that will be over decades. Wind and solar sources are not practical. That leaves natural gas.

Many people see nat gas as a bridge. But we're not bridging to anything; natural gas is going to carry the baseload for many years to come. That's why people are getting more bullish on it.

Remember to buy a sector when it looks terrible, not when it's up 80-90%  ;)

Still likes it but not as much, as drilling is weaker than thought. Selloff in oil, drop in rig count. More efficient drilling ultimately means less work. Continues to de-lever. Everyone's excited about natural gas. Massive exposure to nat gas in Canada, which has better dynamics than US. About a 3.7% weight for him.

Huge disappointment, and management owns its mistakes. He's met with management and is comfortable with the status, but other investors are just done. Given current prices of oil and gas, trades at 13% free cashflow yield. Quality not impaired, but it will take time. He bought more shares.

One of his worst calls in 2024 backing this instead of SU. Downstream challenges continue. Negative EBITDA in a quarter matters. Sentiment is really bad toward these guys. Quality inventory. He sold for a tax loss, plans to come back when confident that downstream issues (refining, which is a low-margin business) are fixed.

He's bullish on nat gas, with the proviso that it depends on the weather (always the Achilles heel). Lots of positives:  AI, data centres, US doubling LNG export capacity between now and 2030. Really good acquisition recently -- a natural fit, bringing down costs, hedged price of nat gas. 

Trades at material discount to US peers. Several decades of inventory. Not as torquey as other names. Yield is 7.8%, happy to earn in his income fund and write calls on it.

It takes discipline to not take profits too early and let your winners ride if the thesis is still playing out. The investor did well to do that, not many can.

Believes his firm is still the second-largest shareholder. Continues to drill exceedingly great wells. Perception of an inventory challenge, but he doesn't agree. Likes the newish CEO a lot. Low growth, but lots of free cashflow. Speculation that POU will buy it out, but he never owns on M&A spec.