Oil Shake Out Coming

Sarah Connor: What did he just say?
Gas Station Attendant: He said there's a storm coming in.
Sarah Connor: I know.
--The Terminator

Credit spreads are widening. Now OPEC can't get coordinated, meaning that more pressure on crude is coming. Add the two together, and this means trouble for leveraged players in the energy patch--particularly smaller ones.

Monday just got a little bit more interesting. US junk spreads took out Dec 2018 wides on Friday. Some of those energy credits are going to take another hit. https://t.co/bHGUzXPX5p

— Jonathan Ferro (@FerroTV) March 8, 2020

The thought has crossed my mind in the last week that the coming shakeout bodes well for the major oils such as Chevron (CVX) and Exxon Mobil (XOM) that have slack resources to weather the storm. XOM in particular--as its aggressive investment plan in what currently seems to be an oversupply situation may turn out to be prescient if many producers leave the market over the next few years.

positions in CVX, XOM