BP says the era of oil-demand growth is over

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I seem to recall reading this same headline 2 decades ago.


Oil bottom is in.


“The impact, including lasting behavioral changes like increased working from home, will affect economic activity and prosperity in the developing world, and ultimately demand for liquid fuels, according to BP. That means it won’t be able to offset already falling consumption in developed countries.” BP is hedging for survival in a world where demand for oil is falling or stays flat. The pivot to more renewables and becoming an energy company will be good for their employees and investors.


If this is making news that peak oil demand has arrived. The good news is now is the time to selectively invest in oil and gas. The exploration side of oil has been minimal for over a decade. The balance of oil trade shows a slow and steady decline in storage inventory is starting to take place. Oil is still useful as a chemical stock outside of energy. I believe that oil has potential to rise to $80 per a barrel by 2025. If interest rates increase sooner, bankruptcies will shake out the zombie producers. The consolidation of the oil industry has been very slow because of low interest rates. If inflation hits first, then the zombie companies may be able to pay down debt to become viable in the future. In short, watch the debt load of oil companies. They don’t have free cash flow right now. The debt levels and under investment in exploration makes for either a slow decline or potentially a break out. My gut tells me that long term they may have one more hay day left. The one with the least amount of debt load will likely survive.


Covid has made everyone so dramatic. “This time is different!”