Canadian energy bull unimpressed by Omicron’s impact on oil demand

One of Canada’s most optimistic energy fund managers reassures investors as the new Omicron variant pushes oil towards its biggest monthly price drop since the start of the pandemic.

Eric Nuttall, senior portfolio manager at Toronto-based Ninepoint Partners, has braved 40% intraday declines in the firm’s energy fund of about $ 860 million in recent months as COVID-19 has upset global demand for fuel. Investors who resisted the urge to sell were rewarded with a cumulative return of 168.45% on Monday, according to Morningstar data.

Suncor Energy (SU.TO) (EU), Cenovus Energy (CVE.TO) (CVE) and Arc resources (ARX.TO) are among the largest holdings in Ninepoint’s Canada-focused energy fund, which Nuttall has managed for approximately 12 years.

As fear rises again as health officials assess Omicron’s danger, Nuttall advises investors to focus on the looming energy supply crisis that he says will drive crude prices to new heights. record.

“When panic and fear become palpable, an investor’s goal is to put their emotions aside,” he told a virtual audience at a Ninepoints event on Monday.

Regarding Omicron’s current situation, he said, “I’ve been on a few conference calls with epidemiologists already, and everyone is saying the same thing; this is the start.”

Nuttall says US President Joe Biden’s remarks on Monday that massive stay-at-home orders are not currently on the table for the world’s largest economy is an encouraging sign for energy investors.

“[Biden is] saying that closures and these types of really drastic measures are not the way to go, ”he said. I had to endure. “

He also pointed to research from Capital One Securities suggesting that last Friday’s drop in oil prices actually caused demand to drop 4.2 million barrels per day, 10 times the impact of the Delta variant in the third. quarter of 2021.

The price of the US benchmark West Texas Intermediate (CL = F) continued to decline on Tuesday, falling 6.16% to US $ 65.64 a barrel at 12:58 p.m. ET. Oil fell nearly 20% in November, approaching its biggest monthly loss since March 2020, when the onset of the pandemic crushed global consumption.

However, it is on the supply side of the equation where Nuttall sees the strongest evidence that crude prices will hit all-time highs in the years to come, even in the face of the pandemic, and as countries seek more and more people to reduce their carbon footprint.

He points to a winning trifecta of slowing US shale growth, OPEC running out of spare capacity due to insufficient investment in new production and supermajors like Shell (RDS-B) and your (PA) directing resources more and more towards renewable energies. This, combined with the demand of a growing world population, underlies its expectations of an impending energy supply crisis.

“Even if we meet all government targets, demand increases until 2035,” he said. “I actually think a plausible scenario is that we reach peak demand for oil and the price continues to rise. It will blow people away. It has a very, very deep implication on what we should be evaluating, and that is the capacity of long-term resources. . “

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on twitter @jefflagerquist.

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Felix J. Dixon