Oil's Outlook

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Oil: 2026

The most important commodity has been in a downtrend since it rose to over $78 last June. At that time, oil was testing its last high of $80 back in January of this year. It failed. It has been in a continuous downtrend. The real danger in its price is if it falls to $50 a barrel. 

Yes, we know that the market prices the commodity in sweet crude (US) and sour (BRENT), but they follow the same pattern. Sweet is the better oil, but less abundant. We use the US crude in our analysis. 

When oil broke resistance at $50 in 2020, it fell all the way to $35. There is a real danger that oil tests $50. Any breach of that level puts the test of $35 back in play. Keep in mind, that two years later, oil rose to touch $125. Needless to say, the history of oil is volatility. You can see this clearly in reviewing the boom and busts of the US economic cycles. 

With this warning, we feel that oil is too valuable with many demands. Third world nations are getting more electricity and they will need oil and gas to produce it. Data centers and their investors make even make their own small energy plants to provide the demands of AI. President Trump has made it his mantra, "Drill, Baby. Drill!" Utilities will need to find funding to add to their grid infrastructure. This may depress their stock price, but if you buy at lows the demand will reward their stock price. This is a good bet, but seek firms that bury their power lines underground. PG&E is in big trouble with lawsuits from wildfires due to their power lines. EVs have put a damper on demand, but the global community is cutting back on climate measures and there is trade conflict with China dumping EV vehicles. The EV revolution will slow. This only helps combustion and oil. 

As you also know we hesitate to offer stock picks, because if we are wrong, we cannot sleep at night. With that said, we venture into three smaller firms with strong fundamentals, good balance sheets and well run companies.

The first is Ovintiv (OVV). It pays a dividend. It just signed a 12-year deal to supply product to a pipeline firm that has access to the new LNG plant that will open in Vancouver in 2028. It has all permits passed. Demand will come from Japan and Asia. The company makes money even with low oil prices. A good entry point would be around $23. Be patient!

The next is Devon (DVN). It also pays a dividend. This company is well run and possibly a merger target. A good entry point if oil continues to slide is $21.

The last firm is in oil services. Borr Drilling (BORR) also pays a dividend. The company expects to lose money all the way into the third quarter of 2026. This allows you to buy at lows. We feel $2.00 is excellent. The company has upgraded its vessel/platforms (12 new) with high demand. We like all three firms. Peace and Merry Christmas!