Institutional interest moving back into the Oil & Nat-Gas sector.
• The three largest economies are actively stimulating, supporting the IMF’s forecast for global growth of 3.3 percent in 2013. With the U.S. forecast to achieve 1.9 percent GDP growth in 2013 and 3.0 percent in 2014, and China at 8.0 percent and 8.2 percent, North American energy demand has growth support. This growth along with high breakeven oil prices provides significant downside support to global and domestic oil prices. The increase in domestic supply has created bottlenecks in a system not equipped to handle the growth but these issues are quickly being rectified, paving the way for strong and stable domestic oil prices.
• Natural Gas, which will also enjoy support from North American growth and stability, and downside protection from inhibitive breakeven prices will remain range bound for the next two years, restricted by power generation economics and production potential at higher prices. Beyond 2015, gas can expect an appreciation on LNG export driven demand increases but will be limited by pricing competitiveness with global markets.
• With WCS up 29 percent year to date and AECO gas up 24 percent year to date, and a more stable and supportive outlook for domestic energy prices, Canadian energy producers can expect increased earnings and improved earnings stability facilitating a re-rating of multiples and appreciation of value within the sector.
Joanne Hruska, Vice President & Portfolio Manager, Aston Hill Financial on BNN.ca Tuesday May 14, 2013 at 1800ET |
