John Segner runs the AIM Energy Fund, which is one of the top performing energy focused mutual funds over the past few years.
He was interviewed today on Bloomberg TV on oil, and among the points he made were:
- He believes we are currently at 84 million barrels a day of demand, 85 million barrels a day of potential production, leaving only 1 million barrels in excess capacity. This is very low, 20 years ago demand was at 58 million barrels a day and we had 25% excess capacity. Supplies right now are running 4% higher than average, and inventory is currently adequate. However, if demand continues to grow on trend, we will add an additional 1 million barrels a day of demand.
- Generally this time of year there is a seasonal period of weak demand ahead of us, which could lead to short term weakening in oil prices. It may not happen this year, due to strong economic growth, but it is normal.
- So far this year his fund is up 22% or so, but that is 'not the way the world works', and he expects a period of consolidation, which shouldn't be a big concern, and he feels it will be a buying opportunity. He expects we will likely be higher by the end of the year.
- The second half of the year should see an uptick, and he is very positive on the longer term outlook on energy.
- Oil service stocks is where he believes the highest earnings growth lies, while exploration and production companies are the most overpriced and the most likely to stall in the near term.
- He was going to present 3 interesting stocks, but there was only time for one, ConocoPhillips, COP, which he believes is cheap at 10x earnings.
[It drives me nuts when Bloomberg cuts their guests off abruptly. It's always when it's just getting interesting.]