Portfolio Manager Ben Cook Provides an Investment Update

By BP Capital Investment Team - January 19, 2021

BP Capital Fund Advisors Portfolio Manager Ben Cook, CFA discussed the firm's Energy and Midstream strategies on the 'Market Wrap' program with Moe Ansari on January 14, 2021.

Listen to Ben Cook's interview here

Energy equities out of the gate too quick in 2021? We don’t think so. A surprise crude oil supply cut by Saudi Arabia limiting crude global by 1mmbbls/d in February and March 2021, combined with a ‘light blue sweep’ by the Democrats has given the market a justifiable boost in confidence that favorable near-term energy supply and demand trends should further support the rebound we’ve seen thus far in 2021.

Spiking global COVID cases and renewed lockdowns are prompting continued economic stimulus which should bold well for energy demand growth. Through year end, combined global stimulus (fiscal & monetary) has totaled ~$28.5Tn or roughly 33% of global GDP. In the US we anticipate 2021 GDP could reach 6%, the highest level since 1983. Global growth should drive energy demand higher particularly as economies re-open upon broader vaccination.

Beyond the immediate impact of supporting near-term economic growth, monetary and fiscal stimulus will likely bring lasting effects in the form of higher interest rates, a dollar weakness, and higher inflation which in turn should support commodity pricing. We believe this trend should support cyclical companies which of course includes energy equities.

Vaccination and herd immunity drive an energy demand rebound to pre-COVID levels likely by the first half of 2022, at which time commodity producers will be called upon to meet a rising global appetite for both crude oil and natural gas. With industry capacity dramatically reduced in response to the sector’s downturn, rising prices will be required to invite the capital, equipment and people necessary to meet rising energy needs. In this environment commodity price ‘spikes’ are not out of the question.

The 'Energy Transition' is underway and should accelerate under a Biden Presidency and Democrat controlled congress. The transition will alter the mix of primary fuels towards zero and low carbon intensive fuels consumed on a global basis. We view these trends as secular in the sense that they should continue to unfold independent of cyclical influences that historically have defined energy commodity and equity performance. Amidst this transition we like natural gas and renewables and we think the lowest cost oil producers can thrive.

At current valuation levels, an abundance of attractive investment opportunity exists across both the renewable as well as the hydrocarbon energy value chains. While equities have risen, in some cases dramatically, we believe much of the sector has yet to discount the full potential represented by the growing needs of energy consumers around the world. As the global economy awakens from the pandemic rising energy demand should translate to an improvement in operating and financial for many energy companies providing continued support to the sector through the balance of 2021.

Contacts: Toby Loftin tloftin@bpcfunds.com 214.405.8278 (m) and Ben Cook bcook@bpcfunds.com 214.770.9609 (m)

Link to Market Wrap with Moe Ansari website 


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