Energy stocks are heading for a correction, Louis Navellier says
News Article Sponsored by SoloProtect
Written by: Tom DiChristopher
Click HERE to Read Article From Publisher
Shares of oil drillers and related stocks are likely to plunge this fall as demand drops off in the face of huge stockpiles of crude and refined fuel products, asset manager Louis Navellier said Wednesday.
Navellier believes companies focused on natural gas will be fine following a blistering hot summer that boosted electricity demand and with forecasts pointing to a freezing winter. But the market is overestimating a summer rally in crude oil prices and the ability of crude demand to hold up.
“What happens after Labor Day, worldwide demand will drop off and the glut will be out of control,” the chairman of Navellier & Associates told CNBC’s “Squawk Box.”
Commodity analysts have worried for some time that huge stockpiles of fuels like gasoline and diesel will reduce demand for feedstock crude oil at refineries during the fall maintenance season, when their activity is already slow. That could lead to a further buildup in crude inventories that will eventually cause another dip in oil prices.
Prices have recently been bolstered by speculation that OPEC members and other producers could cut a deal to boost crude futures when they meet next month. But Navellier cited a Goldman Sachs study that said excess supply would continue weigh down crude prices even if OPEC agreed to take coordinated action to limit output.
Further, energy companies don’t have the earnings or the sales to sustain their stock gains, he said.
“I’m very, very concerned that people have confused seasonal strength with real strength, and so it’s not going to end well. Oil always goes up in March and always goes down in September,” he said.
Navellier said oil prices could bottom at the recent low around $38, or they could retest the winter lows in the high $20s.