For years now, next to no one has been bullish for oil stocks. That includes both Obama and Trump voters.
The industry and its stocks are slogging through an uphill climb thanks in large part to three problems: too many bad companies that can’t turn a profit, a supply glut and low prices.
But with the 2020 presidential election less than a month away, things are about to change from bearish to bullish for oil stocks… and inflation. And that’s no matter who wins, incumbent President Donald Trump or former Vice President Joe Biden…
The coronavirus pandemic was the final nail in the coffin for some oil companies. Before COVID, the only thing keeping many of these companies in business was low interest rates and cheap loans.
According to the Institute for Energy Economics and Financial Analysis, most of the top drilling companies were actually losing money — before the pandemic. Out of the top 40, only four had positive cash flow in the first quarter of 2019.
That’s hardly a recipe to be bullish for oil stocks.
In fact, more than 200 drilling companies have gone bankrupt over the past five years alone. Many of the survivors kept pumping oil to make their loan payments and try to live to fight another day.
But then came the pandemic… and oil prices cratered — literally below zero — as demand plunged. Twenty more U.S. drilling companies have declared bankruptcy, with Chesapeake Energy being the most notable.
Chesapeake is a pioneer in shale drilling and was once one of the industry’s largest firms. It filed for bankruptcy protections in June with more than $9 billion in debt.
Deloitte, a consulting firm, expects yet another wave of bankruptcies as drilling companies will look to write-off more than $300 billion in bad debts.
So why should anyone be bullish for oil now? And what does any of this have to do with inflation?
Check out my video, where I explain… and discuss three “oil majors” I expect will double in value over the next 18 months… and then let me know if you’re turning bullish for oil in the comments below.
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