Making Hay Monday – August 11th, 2025

7 months ago 412 views 4 min read

David Hay

Editor

Haymaker

Making Hay Monday

Nobody Cares

“There has been a dominant view that by OPEC+* withholding its barrels, this has caused the buildup of large spare capacity in the system. This has been a major contributor to the bearish sentiment in the system. However, as (OPEC+) started unwinding their voluntary cuts, it is becoming increasingly clear that some producers are not able to meet their quotas, while others have already maximized their production and thus the additional barrels are likely to be much lower than originally anticipated.” -The Oxford Institute for Energy Studies

*OPEC+ includes Russia

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As you may suspect from the title, this is a follow-up Making Hay Monday (MHM) from last week’s Who Cares? It’s a bit of a segue because the main thrust of the most recent MHM was the utter lack of concern about one of the most over-valued, over-owned, and over-hyped stock markets of all time. That no-worries attitude also extends to the economy irrespective of the growing body of evidence indicating there is plenty to worry about, including a possible recession.

This MHM edition is centered on the extreme apathy investors are displaying toward energy stocks, particularly those that are oil-centric. In a stock market priced for perfection, and then some, oil companies are valued as if what I have long called “The Great Green Energy Transition” remains in full swing. Under that paradigm, the pervasive belief was that oil producers would soon become — appropriately, considering how that fuel source was formed eons ago — dinosaurs. Frankly, natural gas companies were similarly regarded… or, more accurately, disregarded.

In addition to the still lingering negative aura of Net Zero hanging over the oil industry, there are also more mundane concerns such as the supposed weak demand for crude, as well as an oversupply, particularly from OPEC. All of these factors have served to depress the price of oil and the shares of its producers. My pal, the highly astute Jesse Felder, has given me his permission to relay the following visuals. The first two concisely illustrate how few retail investors care about this sector whose products are essential to economic growth and human flourishing. Fascinatingly, however, “commercials”, the pros who trade oil for a living, have a much more sanguine view.

XOP is the S&P Exploration and Production ETF

A graph with red and blue lines

AI-generated content may be incorrect.

In his note bearing these charts, he asks the provocative and, in my view, money-making question:

So what is it that commercials see that investors are missing? For one thing, the three shale oil producing regions most responsible for the growth in production in recent years are all now “well’ (pun intended) past their peaks.

Perhaps the key to the diametrically different view of the pros vs amateurs is that those in the know are experienced enough to know that the IEA doesn’t know. As this newsletter has repeatedly pointed out, the International Energy Agency has been spectacularly wrong about both oil supply and demand, particularly the latter, for decades. …