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No. of Recommendations: 2
As mentioned, I would welcome any additional thoughts or feedback. Schedule permits, I plan to update this thread on an ongoing basis.

In my March 18, 2018 post, I mentioned I don't have any particular interest in investing in oil-related stocks unless WTI declines to $40 to $45. Goldman Sachs, however, thinks differently. In particular, Goldman is now advocating for an investment into Big Oil. They liken the current phase of the oil environment to be similar to that of the 1987-2002 "restraint" period, when:

1) The 11 mm b/d of OPEC spare capacity created a sense of long-term abundance, resulting in a backwardated WTI futures curve;

2) High and tight financing costs restrained CAPEX growth and resulted in Big Oil keeping market share; and

3) Costs deflation - falling by 1% p.a. versus the U.S. CPI of 5% p.a.

... resulted in Big Oil earning a total return that was 6% p.a. higher than the market. Note this also beat the returns of the E&Ps and oil services stocks. Conversely, Big Oil actually underperformed the market by 1% p.a. on average during the "expansionary" period from 2003-2013--a period when oil rose from $30 to over $100 a barrel, due to: 1) Big Oil losing market share from cheap financing, 2) rising CAPEX requirements, and 3) cost inflation (14% p.a. vs. CPI < 2% p.a.).

I am coming around to this idea - Goldman also asserts that decarbonization and the rise of EVs may be the best thing that ever happened to Big Oil, as this has resulted in an exodus of both investors and lenders in the industry, resulting in a heightened equity risk premium which savvy investors could capture over the next decade or so.

Disclaimer: I am long XOM and CVX.
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