Bought Oil again

Bought a 5% position in oil producers again with the correction in WTI over the past 2 days: 2% CNQ, 2% Equinor, and 1% Pretobras.

Will write more here on the weekend.

Update: Friday 11th March.

Why I bought oil stocks:

• They are still not expensive.  CNQ for example is trading at 12X TTM earnings, when WTI averaged $68.
• They are going up.  Technical Analysis 101: buy stuff thats going up.
• There may still be a shortage of oil, same inflation story as before the war.  The war has removed Russia's exports of 5m bpd (~ 5%) from the market.  Russia's production will drop without Western technical assistance.
• Peter Zeihan raised a point: If Russian crude can't be exported through their eastern ports, and the backlog is too big, they need to stop production, which can take years, or even decades, to recover from.

The risks:

• Biggest risk is a peace deal between Russia and Ukraine.  Israel is trying to broker peace, and while both Putin and Zelensky have gained popularity in the war, they both stand to lose if it drags on.  Zelensky will lose his country, and Putin should be remembering Afghanistan.  I give peace a 1/3rd chance.  If it happens, I'll be happy for the Ukrainians, but would wish I had bought my oil stocks cheaper.
• Avoid companies operating in the potential warzones of the Persian Gulf, Eastern Europe and Russia (doh!), and the South China Sea.  And Africa may not be that stable if food prices soar,
• The US president has the power to stop crude exports, which would make WTI trade at a discount to Brent.  This is a risk for US and Canadian producers, and is the reason I'm not buying XLE (to hold together with CNQ).
• Petrobras is risky and may go to zero if nationalised (or if asked to subsidise the country).  Brazil has a bad track record on this.
• I am uncomfortable buying when everyone else is.  Energy might be the new FAANG.  Could be, but I'm still uncomfortable.  Need to remind myself that the crowd is correct in the middle of a trend.  And thinking that your'e smarter that everyone else does not make you money.

You pays your money and you takes your chances.