These are the charts I am watching right now.

May 2023 Update to the Crude Chronicles Energy Index

Updating the Crude Chronicles Energy Index or CCEI is a manual process.

I don’t have a FactSet or Bloomberg.

This is a very low-cost operation.

Every month I gather the latest pricing data on 30+ O&G companies to update it for my readers.

And as always, it’s laid against the backdrop of the long term.

In this post, I show how:

1. We are ending the “Doubt” phase and transitioning to the “Optimism” phase. Similar to an energy transition these transitions can be painful.

2. The sector will need to defend ROCE to get credit for its earnings power.

3. The CCEI market breadth stinks right now but I’m watching for it to turn.

4. The CCEI is no longer in no man’s land and is now in lockstep with reality ie. ISM & oil prices.

5. There are signs of global liquidity improving at the margin and hence ISM, oil and the CCEI could be improving on a rate-of-change basis.

6. Consensus is already in slowdown mode but not quite yet on par with energy earnings recessions of the past 110 years.

Let’s dive in.

For some background on how this index was created go HERE.

It is updated as of the end of May 2023.

We are ending the “Doubt” phase and transitioning to the “Optimism” phase.

Ingrained in me are the teachings of the great market technicians Alan Shaw and Louise Yamada formerly of Smith Barney (HERE).

Their philosophy is that every major secular bull market, commodities included, goes through 3 phases:

1. Disbelief

2. Belief

3. Greed

I adopt their teachings but my phases are named

1. Doubt

2. Optimism

3. Parabolic Euphoria

Why do I rename them? For a catchy acronym - The D.O.PE. Cycle

I think we are closing the door on the Doubt phase

Nothing characterizes this more than the next chart.