You are now leaving Sprott.com and entering a linked website. Sprott has partnered with ALPS in offering the Sprott Gold Miners ETF. For fact sheets, marketing materials, prospectuses, performance, expense information and other details about the ETF, you will be directed to the ALPS/Sprott website at www.SprottETFs.comContinue to Sprott Exchange Traded Funds
Iran export reductions to be TRIPLE consensus?
Today’s indication from the US State Department that no waivers will be granted for Iranian oil imports and that it is their desire that Iran exports “go to zero” is a very, very important development for the oil market. Informed forecasts are now pointing to a reduction in Iran oil exports of 1.5-1.6MM Bbl/d by the end of this year. This is TRIPLE THE MARKET CONSENSUS and is a much more hawkish stance than what the prior administrations had taken (100% immediate reduction vs. 20% reduction per quarter).
What does this mean? We believe that OPEC+Russia only have 1.7MM Bbl/d of spare capacity. Accounting for the ~0.9MM Bbl/d of incremental production announced over the weekend (OPEC 0.7 + Russia 0.2) we believe this takes global spare capacity below 1MM Bbl/d. This is really, really important. The last time spare capacity got to such a low level (below 1.5% of total production) oil spiked to $147/bbl. 1% spare capacity leaves the world without any emergency buffer in the event of a political disruption (say like in Libya overnight where General Haftar handed over control of the country's largest export port to a non-UN recognized government and could mean the continuing loss of ~0.4MM Bbl/d of exports!).
Before today we had accounted for no Iran exports + Venezuela declines in 2018 and 0.8MM Bbl/d of collective declines in 2019. Of this Venezuela was 0.3MM Bbl/d (likely to be much higher) and Iran was 0.5MM Bbl/d. Today’s announcement triples our Iran disruption. We already had OECD inventories hitting the lowest level in history by May 2020 and today's statement accelerates the timeline on that possible event.
In short, a plausible reduction in Iranian exports by the end of 2019 could consume all of the spare capacity within OPEC and Russia. We are on a path towards unchartered territory. This event reinforces our view that oil is heading into triple digit territory in 2020 (today just made it a possible 2019 event). With oil only up 3.5% and some oil stocks only up 2% I do not think people are appreciating the significance of today.
We are in a multi-year bull market for oil.
Senior Portfolio Manager
Ninepoint Energy Fund / Ninepoint Energy Opportunities Trust
Source: Ninepoint Partners
CLICK IMAGE TO ENLARGE
Source: Bloomberg, Energy Intelligence
1 All returns and fund details are a) based on Series F units; b) net of fees; c) annualized if period is greater than one year; d) as at May 31, 2018; e) 2004 annual returns are from 04/15/04 to 12/31/04. The index is 100% S&P/TSX Capped Energy TRI and is computed by Ninepoint Partners LP based on publicly available index information.
The Fund is generally exposed to the following risks. See the prospectus of the Fund for a description of these risks: concentration risk; credit risk; currency risk; cybersecurity risk; derivatives risk; exchange traded funds risk; foreign investment risk; inflation risk; interest rate risk; liquidity risk; market risk; regulatory risk; securities lending, repurchase and reverse repurchase transactions risk; series risk; short selling risk; small capitalization natural resource company risk; specific issuer risk; tax risk.
Ninepoint Partners LP is the investment manager to the Ninepoint Funds (collectively, the “Funds”). Commissions, trailing commissions, management fees, performance fees (if any), other charges and expenses all may be associated with mutual fund investments. Please read the prospectus carefully before investing. The indicated rate of return for series F units of the Fund for the period ended May 31, 2018 is based on the historical annual compounded total return including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada should contact their financial advisor to determine whether securities of the Fund may be lawfully sold in their jurisdiction.
The opinions, estimates and projections (“information”) contained within this report are solely those of Ninepoint Partners LP and are subject to change without notice. Ninepoint Partners makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Ninepoint Partners assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Ninepoint Partners is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Ninepoint Partners. Any reference to a particular company is for illustrative purposes only and should not to be considered as investment advice or a recommendation to buy or sell nor should it be considered as an indication of how the portfolio of any investment fund managed by Ninepoint Partners is or will be invested. Ninepoint Partners LP and/or its affiliates may collectively beneficially own/control 1% or more of any class of the equity securities of the issuers mentioned in this report. Ninepoint Partners LP and/or its affiliates may hold short position in any class of the equity securities of the issuers mentioned in this report. During the preceding 12 months, Ninepoint Partners LP and/or its affiliates may have received remuneration other than normal course investment advisory or trade execution services from the issuers mentioned in this report.
Ninepoint Partners LP: Toll Free: 1.866.299.9906. DEALER SERVICES: RBC Investor & Treasury Services: Tel: 416.955.5885; Toll Free: 1.877.874.0899