Time To Strike In The Shale Sector

There’s been a fascinating turnaround in the oil stocks in the past few days, and we are looking at the seismic rebalancing into energy that is not just being created by machines or tactical hedge funds. As oil has been drifting lower, we’ve found a lot of strength in energy shares, even though the general stock indexes have been exceedingly weak. Take note, traders: the time has come.

We’ve been exceedingly patient on oil and oil stocks and both have followed the timelines that I laid out here in columns and in my book. Two things, however, have acted on me to make a minor timeline adjustment; One, the acceleration of oil stocks to the downside in the early summer even as oil remained near $60 and the lack of rapid M+A among the shale players. Consolidation may yet come, but this can no longer be the only trigger for investment – as stocks have acted weak while oil was strong, now the stocks are beginning to rally as oil fights to remain near springtime lows.

Oil won’t make significant new lows, folks. I’ve said that all along and still believe it. Thinking only about Canadian oil, where basis prices are already in the $20’s, there’s a level of ridiculousness that won’t be breached. And we’re finally seeing some true reality checks inside the quarterly reports just out of the mini-majors and shale producers, as well as some fundamental signs of the supply destruction yet to come.

The EIA still uses…