We could see US$100 oil by the end of this year: Eric Nuttall
“The oil market remains exceptionally tight,” Eric Nuttall, senior portfolio manager at Ninepoint Partners LP, said in an interview Tuesday.
“When we look at global oil demand, we’re back to pre-COVID levels. So there are strong reasons to believe the market will continue to grow throughout this year as Omicron passes,” he said. “But the real story remains on supply. I believe we’re in a structural bull market – a multi-year bull market for oil that will end in all-time high oil prices.”
American benchmark West Texas Intermediate rose 3.8 per cent to settle at just above the US$81 per barrel mark on Tuesday – the highest since Nov. 11.
The commodity gained alongside equities on the back of reassuring remarks about the pace of stimulus withdrawal from U.S. Federal Reserve Chair Jerome Powell during a senate hearing.
Nuttall believes the first half this year will be characterized by a “period of digestion” and normalizing demand as countries grapple with the spread of the Omicron COVID-19 variant, while the second half of the year will be a time of a “realization that we’re in a post-shale world," he said.
However, the main factor will be constrained production from OPEC.
“The exhaustion of OPEC’s spare capacity - so, as they bring on all that spare curtailed volume - is going to be the most bullish, watershed event in this industry in many, many decades,” Nuttall said.
“I think we could see $100 [oil] by the end of this year.”
His energy fund, the Ninepoint Energy Fund, posted a return of more than 180 per cent last year – significantly beating the broader TSX Composite and earned the top spot on Morningstar’s energy-focused fund ranking.
Currently, Nuttall uses a conservative US$70 oil price to gauge investment opportunities and said he’s seeing retail investors finally flocking back to the sector after years of underperformance.
“Do you want to own energy stocks today? When I look at valuations, when I look at free cash flows – the overwhelming answer is very strongly yes,” he said.