Canadian energy stocks and oil prices rallied earlier this week after an attack on Saudi Arabian oil facilities knocked out five per cent of global output and compelled investors to reassess the long-suffering sector.
But is the Saudi supply disruption enough to turn around sentiment on Canadian energy over the long term? Here’s a look at what guests on BNN Bloomberg have said about the oil markets and whether it’s time to jump into Canadian energy stocks.
“When we think about valuations of [Canadian energy stocks] … we had the worst sentiment in history, coupled with the cheapest valuations in history, and now we have the largest supply disruption in history. In my mind, those are three very important ingredients to a powerful rally.
“This is not a one-day event, this is going to have lingering effects for the days, weeks and months ahead – not only in an enduring political risk premium, but also when we think about needing a catalyst for bringing money off of the sidelines … Many stocks – given how far they fell – could easily double or triple from current levels.”
“This stuff is so unloved and detested, and I love it. But I don’t think now is the time to load up on energy … We have seen head fake after head fake. If we can get a break on Trans Mountain and maybe a [Conservative] win in October… I think those are catalysts for the energy sector to finally turn around.”
“The lasting impact is the risk premium, which we haven’t had in several years.
“This obviously is a big windfall for a lot of Canadian companies. Higher oil prices flows directly to the bottom lines of these companies, and a lot of these companies are generating significant amounts of free cash flow. This is just going to boost that amount even more and so there will be more money to return to investors, whether through dividends or share buybacks. Stocks that were cheap before just got cheaper.”
“The sentiment in energy has been so negative for so long. So I think a lot depends on how long the outage in Saudi Arabia lasts, and can they get production back online or out of storage?
“The [Canadian energy] industry is far way away from turning around dramatically … If there’s one sector in Canada that I would be most excited about heading into the end of the year, it’s certainly energy.”
“One of the things I’m going to say to investors in New York is that energy shares in Canada are massively undervalued – objectively.
“It should be seen as a buying opportunity and that should be even clearer in light of the security premium that people have to pay to access Middle Eastern oil given what happened [in Saudi Arabia]. And by the way – the strike against the refineries in Saudi is not the end of the story. It points to a deeper problem in terms of instability and unpredictability from the OPEC countries and so I hope investors will realize safety, stability, security in Canada is worth an awful lot.”
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