As uncoordinated as the OPEC and non-OPEC oil producers have proven themselves to be in the past in reaching oil-output agreements, I thought for sure they'd come up with something in their latest meeting in Doha on the weekend.
Not that a production "freeze" agreement from the OPEC and non-OPEC members (significantly Russia) in Qatar this weekend would have meant much anyway -- the goal that prefaced the sit-down was for a return to January production levels, fully 400,000 barrels a day less than what is being produced today. Surely that was a bar so low that even the most suspicious and angry members of this oil family could agree upon it?
And what are the Saudis thinking? They have always maintained that they were only willing to agree to new production quotas if the Iranians would come on board. For weeks leading up to the meeting, the Iranians made it clear that they wanted nothing to do with new production limits, seeking to restore pre-sanction production as fast as possible.
The Iranians even chose to refrain from attending Doha, signifying their firm stance on increasing production as fast as they can. And yet, the Saudis continued to the farce of reaching a successful agreement, implying that they could somehow make the Iranians comply at the last moment.
It's like a family that has lost its rich, old matriarch -- coming together to split up the spoils, and letting out every last petty suspicion and resentment, and destroying whatever unity they had before her demise.
For us as investors, however, maybe this is the best result we could have hoped for. The two OPEC meetings previous to this Doha disaster dropped oil prices and shares of oil companies to value levels, and there is every indication that it's doing so again, despite the Qatar oil strike that is currently chopping two million barrels a day from global oil supply, if only temporarily.
Here is the long-term plus side of the OPEC ineptitude: We're now going to get a natural rebalancing of the supply of oil, without all those unenforceable and paper-thin agreements from these infighting family members. We've been watching production rolling over here in the U.S., and in Canada, and even the International Energy Agency agrees that supply and demand curves will again meet up late this year.
So I say, enjoy this Doha-inspired drop in oil prices and oil stocks. It'll likely be the last one you will ever see.
Find your favorite oil companies for the long haul and put in your buy orders. For me, those are EOG Resources (EOG), Cimarex (XEC), Hess (HES) and Continental Resources (CLR). Target them as they go down from the all-too-familiar down draft of oil prices following an OPEC meeting.
Assume that oil won't get below $35 in any scenario, and scale in. And then sit back and wait. I think you'll find those buys to be some of the best trades you'll make for 2016.