I’M AN OIL MAN

I’ve been an oil man ever since the day I was born. I was raised under a derrick in Brooklyn, NY, bearing witness to the black gold spewing from the ground–making all of the local peasants sick from exposure.

I understand that the price of oil has dropped a good 20% in recent weeks, sending most small drillers, those ill-equipped to handle the burden of price fluctuation, inexorably, into the ‘fag box.’ However, all of that is about to change.

The godly run in the United States dollar will ease up and commodities will catch a bid. God willing, the maniacs in the middled east will begin to truly cut each other’s heads off in earnest, seizing ports and strategically vital oil producing districts of their barren lands–lending, mind you, to a sharp rally in the price of WTI and Brent crude. Our friends in the House of Saud prefer to have higher prices, but will punish others with lower prices, if need be.

I cannot promise you that the recent rout in energy shares is over. As a matter of fact, it has a bit of a 6th inning feel to it. But I will tell you this, very simply: this drop, this seasonal malaise, will ultimately lead to the best trade of 2014. This is it. Nothing else will offer you ‘castration level’ returns, barring some sort of crazed run in the shippers–which might occur in December. Jot that down.

The price of these energy stocks are factoring in $65-70 crude. This is a mistake and the market will eventually come to realize that.

Here are some ideas, with 3 month returns next to it.

SDRL -38%

PDS -31%

WRES -21%

HK -51%

WTI -35%

OAS -29%

RDC -22%

ESV -28%

HERO -50%

KEG -48%

AREX -40%

BBG -26%

NBR -29%

CRZO -29%

VNOM -29%

CHK -26%

TLM -22%

UPL -23%

SGY -37%

CVEO -52%

GDP -51%

Now tell me, does this look like a rational 3 month decline or something more relating to hedge fund liquidation and capitulation?