• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

Debunk This: The Very Real Demand for Oil

Let's look at the real prices for Brent and why I would never, ever sell Exxon or Chevron.
By JIM COLLINS
Feb 28, 2023 | 03:35 PM EST
Stocks quotes in this article: CVX, XOM, TSLA

There is a bit in the T.V. sitcom Seinfeld in which Jerry and Elaine riff on the meaning of "bunk" and "debunked." This is a good way to start off about the "debunked conspiracy theory" of the "Wuhan lab leak" after current intelligence, according to the Department of Energy, anyway, examines the most likely cause of the Covid-19 outbreak.

Now, let's re-examine other "conspiracy" theories.

First and foremost is the theory that hydrocarbons are "bunk" and that oil prices are going to go to $20 per barrel, $12 per barrel or whatever ludicrous figure is spouted off this week. On a day in which it is snowing in both New York County and Los Angeles County, let me just put an end to that conspiracy theory with some pure data. I live in the real world and, in the real world we use data to analyze current conditions and to predict future outcomes.

Set this chart from Trading Economics to "6M" and notice how stable Brent crude prices have been thus far in 2023. Yes, the market fluctuates (another bit from another Seinfeld episode) but, honestly, we are living in the low-$80s, and that is just fine for the oil majors. There is no oil company on Earth that is not profitable with crude at $80 per barrel. As evidenced by Chevron's (CVX) share buyback extravaganza ($75 billion authorization in total, pegged today by CVX management at $17.5 billion per year) cash is flowing in the oilpatch. Please do not sell (XOM) and CVX, or any of the other components of my HOAX portfolio ... ever.

Oil prices are only threatened by one thing: supply. A short, sharp shock to supply can send Brent flying toward $120, as it did when Russia's Vladimir Putin invaded Ukraine a little more than a year ago. Honestly, though, the global oil industry is, despite the hysterical efforts of politically correct "ESG" mavens, actually well-capitalized and flexible. There is very, very little risk of an oil supply glut, mainly because China is No. 1 in the world in population, but according to Trading Economics, only No. 6 in oil production, producing about 4 million barrels per day in the most recent month for which data is available, vs. the U.S.' run-rate of 12.4 mmbpd. India, which is neck-and-neck with China for the world's population crown, comes in at No. 26 in the list of oil producing nations.

Demand for oil is steadily growing thanks to emerging markets ... and it always will be. If you try to take Exxon XOM or CVX from me or from HOAX ... there's gonna be a rumble.

But what about electric vehicles? This morning, a day ahead of Tesla's (TSLA) massively-hyped Investor Day, data was published, courtesy of China Merchants Bank International and reported via investing.com, that Tesla's China sales have been running well below fourth-quarter 2022's pace thus far in 2023. According to the data in investing.com's article, Tesla's 2023 weekly sales in China through Sunday are averaging 1,013 cars per day, down from the quoted October and November 2022 run-rate of 1,300 per day.

These data are wonderful, wonderfully nebulous -- China has a web of agencies reporting car sale data and Tesla never reveals unit sales by region -- but they show the path. Nerds know their numbers Stocks are, at their core, numbers.

So, a quick check of one of many nerdy spreadsheets that I have compiled shows that Tesla registered 439,770 cars in China last year. That is from third-party data reported by the excellent site CNEVPost.com. So, that would be an average of 8,457 cars/week, or about 1,200/day. Last week's sales for Tesla were reported by China Merchants Bank International at 10,703 registrations. So, Tesla started very slowly in 2022 in China, has picked up momentum recently, but still lags behind the sales pace of second half of 2022. Also, that same data show roughly 70% of Tesla's deliveries in China are Model Y, as the Model 3 continues to approach its sixth birthday in July.

But, net net, Wall Street, for some reason, expects Tesla to deliver about 1.8 million vehicles in 2023 vs. 1.33 million in 2022. To achieve that, TSLA would need Chinese sales to well exceed last year's 440k, and for all its models to sell well, not just the Model Y.

So, that's how we see the world at my firm Excelsior Capital Partners for commodity companies, like oil producers, supply is key. There has been no supply boom since the Covid slowdowns and Russia is under sanctions and also, reportedly, slowing production.

Green light.

For consumer products companies like Tesla, higher inflation, resulting higher interest rates, and a generally horrible global macro environment make it harder for consumers to afford their products.

Red light.

Don't overthink it. The strained global consumer is not a conspiracy theory to be debunked. That macro backdrop is real, and for consumer products companies, it is not spectacular.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Collins' firm owned XOM and CVX and puts on TSLA.

TAGS: Oil | Stocks | Energy | Renewable energy | Investing

More from Stocks

The Chasing Slows on Wall Street

James "Rev Shark" DePorre
Mar 24, 2023 4:34 PM EDT

After Deutsche Bank shakes up investors, market cools a bit, which might be a healthy development.

Stay Away From These Types of Stocks, They're Radioactive

Jim Collins
Mar 24, 2023 2:35 PM EDT

Here's what you're better off buying. I certainly have.

GE Looks Poised for a Pullback: How to Trade It Now

Bruce Kamich
Mar 24, 2023 1:45 PM EDT

The shares stopped short of my price targets.

It's Not Whether the Next Shoe Will Drop, But Where and When

Bret Jensen
Mar 24, 2023 11:30 AM EDT

A few months of anxiety likely lies ahead of us, and caution remains the watchword of the day.

The Good, Bad and Ugly: What's Happening and What Investors Need to Do

Stephen Guilfoyle
Mar 24, 2023 10:45 AM EDT

Right now I have more in cash, or equivalents, than in equities. Ever hear of a Wall Street guy saying that before?

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 01:56 PM EDT PETER TCHIR

    Very Cautious

    I am very cautious here. I don't like how the c...
  • 08:58 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How to Adjust Your Trading Style as Market Conditi...
  • 05:00 PM EDT CHRIS VERSACE

    AAP Podcast on the Fed Decision!

    Listen here!
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login