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Oil could hit $120 in 2023 as China opens up, energy to be the year's best-performing sector - George Seay

Kitco News

Oil could reach $120 per barrel in 2023 as energy supply fails to satisfy rising demand, said George Seay, Founder and Chairman of Annandale Capital, which is why he maintains that the energy sector will outperform in 2023.

“Between $80 and $120 per barrel [is my price forecast],” he told Michelle Makori, Editor-in-Chief and Lead Anchor at Kitco News. “If demand goes up by one to three million barrels [per day], I don’t know where the new supply is going to come from to satisfy demand. That calls for higher prices.”

Seay’s fund Annandale manages $1 billion and invested heavily in the energy sector in 2022, particularly in upstream equities like Black Stone Minerals, which gained 53 percent in value over the year, and Antero Resources, which gained 82 percent year-to-date. Several of the funds Annandale Capital manages have yielded an annual return of over 50 percent.

Seay highlighted that as China eases from its zero-COVID policy, demand for oil will increase, even as its production is constrained.

“When China comes back online, there’s a whole lot more demand right there,” said Seay. “And if you look at the sources of supply around the world, OPEC [The Organization of Petroleum Exporting Countries] just does not have the margin to produce a whole lot more… and here in this country, almost every major oil base is rolling over. We’re having a really hard time finding compelling wells to drill.”

A ‘super-cycle’ in energy

Seay claimed that the world will soon experience a “super-cycle” in energy, whereby supply will fail to keep pace with increasing demand from emerging markets, causing a dramatic increase in prices.

“The U.S. administration is trying to artificially reduce supply at a time when China comes back online after COVID, as the world starts to grow again,” he said. “When we get through this tough cycle, there is going to be more demand for energy… I think we’re going to enter a super-cycle, a secular bull market, for these commodities [oil and gas] in the next three to five years.”

Seay suggested that political factors around environmental regulation had weighed down on energy production over the past decade.

“We’ve had ten years of under-investment in oil and gas because there has been so much volatility in commodity prices, and so much governmental pressure and opposition to increasing supply,” he said. “That hasn’t changed, and you can’t catch up in a year or two. It’s going to take multiple years to get enough energy, not just through fossil fuels, but also through wind, solar, hydro, and everything else.”

Watch the video above to find out which energy stocks Seay invests in.

Are fossil fuels here to stay?

Seay also supports so-called green energy, which includes wind, solar, and hydro, but says he is “sober minded” about the reality of transitioning away from fossil fuels.

“It has become almost a religion or a cult among climate change advocates to just eliminate fossil fuels immediately,” he explained. “You will ruin the lives of tens of millions, if not hundreds of millions, of people around the world if you do that. We cannot pivot that quickly.”

Stressing that oil and gas constitute “81 percent” of the world’s energy, he added that “anyone with rationality would love to see us pivot to cleaner forms of energy over time,” but that such a transition would take “between 15 to 35 years.”

“We still need fossil fuels, but we’re having a hard time finding enough of those,” he claimed.

Gold Outlook

The gold price fell by 1.5 percent over the year, despite high inflation, which Seay attributes to investors viewing crypto as an inflation hedge.

“I think a lot of people substituted crypto and Bitcoin for gold as their inflation proxy,” he said. “Obviously crypto has been an unmitigated disaster.”

To see Seay’s 2023 gold price forecast, watch the video above

Fed Outlook

As the Federal Reserve hikes interest rates to combat rising inflation, which reached a peak of 9.1 percent in June, Seay expects the Fed to pause its rate hikes.

“I do expect a pause unless the economy falls off a cliff,” he said. “I do not expect a pivot. I think the Fed is going to watch and wait a while. And this economy has proven a lot more sustainable, enduring, and resilient than a lot of people expected.”

To find out what sector Seay thinks will perform the worst in 2023, watch the video above

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