‘We were bullish coming into this year,’ he said. ‘And we remain bullish, just not as much as we were.’
Explaining what that means, Nuttall said that although supply was higher than expected in 2023, global inventories are at their lowest since at least 2017 after a sharp contraction in Q3. Meanwhile, oil demand remains strong.
However, the Organization of the Petroleum Exporting Countries, better known as OPEC, is in the driver’s seat.
‘(A year ago we thought) we would have been at US$100 (per barrel) oil now given where inventories are. Well, inventories got to where we thought they would directionally, but it’s the reasons how we’ve gotten here. OPEC has been involved a little longer than we thought they would. Therefore there is more spare capacity for them to have to eventually return onto the market. That puts a ceiling price in terms of how high oil can go,’ he said.
‘We think the theme for 2024 is going to be a market where US supply growth massively contracts. Demand remains strong — certainly not as strong as 2023, but we will see demand in excess of a million barrels per day, allowing OPEC to return those barrels onto the market gradually with the intent of not having inventories build,’ Nuttall added.
He has a base-case oil price of US$80 for 2024, and said it will be a stock picker’s market.
‘In general, the sector is fairly valued at US$70 and is really exciting at US$80 — that’s in general,’ he said. ‘If you can pick the right stocks, we are finding what we think are phenomenal opportunities.’
Nuttall favors Canadian mid-cap oil companies, and said they don’t need a ‘wildly bullish’ oil price to succeed.
‘We remain convinced that there remains an unbelievable opportunity in these names, especially with sentiment now at almost historic lows,’ he concluded. ‘We go through these bouts … unfortunately this sector is volatile. To compensate you for that volatility we still see very meaningful upside in these names. And we remain bullish.’
Watch the interview above for more from Nuttall on oil supply, demand and prices in 2024.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.