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Oil supply isn't growing nearly as fast. Because of project delays, exhausted fields and maintenance problems, oil supply from non-OPEC producers, the agency figures, will grow by fewer than 1 million barrels a day in 2007. That's a huge drop considering that the past three quarters have seen growth of better than 1 million barrels a day from these non-OPEC suppliers. All this comes with global inventories down 13 million barrels from the same time in 2006.
In the midterm, the agency sees even more supply problems. Russia, the world's largest oil producer recently, is likely to hit a production plateau within three years. Violence in Nigeria has left about 800,000 barrels a day of capacity idle there, with no prospect of a solution to what amounts to a local civil war.
3 stocks to buy
I'm going to identify three Canadian stocks to buy for investors who want to add some long-term currency protection -- with the potential for very good returns -- to their portfolios. If you agree with my disagreement with the conventional wisdom, you can add these to your portfolio now.If you think the conventional wisdom is right and I'm wrong, you can wait for the dip and then add these stocks to your portfolio. And if you don't like the way the market is behaving right now -- and who does -- you can build positions in some of these names gradually, maybe by dollar-cost averaging into them by buying a set dollar amount each month over the summer.
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Here are my three suggestions:
Brookfield Asset Management (BAM, news, msgs). Brookfield Asset Management owns a bit -- and in many cases more than a bit -- of most of Canada's asset classes. It owns and manages more than 1 million acres of timberlands in Canada, Brazil and the United States. Its portfolio of real estate includes commercial and residential properties in Toronto, Calgary and Ottawa, as well as in Brazil, the United Kingdom and the United States. Its $10 billion in power generation and transmission assets include the largest wind farm in Canada.
The stock recently split 3 for 2, and Brookfield plans to create a limited partnership called Brookfield Infrastructure Partners to hold its electricity transmission and timber assets. About 60% of that partnership will be spun off to shareholders, and Brookfield will retain the other 40% and manage the operations. On June 11, Brookfield made an all-cash offer of about $3.5 billion for Australia's Multiplex Group, which has $6 billion in property assets under management.
EnCana (ECA, news, msgs). Before the entire stock market headed south, shares of this Calgary natural-gas producer were showing good, and improving, relative strength, thanks to signs that natural-gas prices were ready to move up again.
EnCana shares were outperforming 80% of all other stocks. The company has spent a good part of the past two years selling off overseas projects to concentrate on production in North America. That has lowered EnCana's cost of production and given the company a huge pool of developed and undeveloped natural-gas assets. The company is the largest landholder in western Canada, with about 25 million acres and, with ConocoPhillips (COP, news, msgs), is the 50/50 owner of oil-sands projects that are expected to ramp up production this year to 62,000 barrels of oil a day.
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The other CanadaAs investors begin to plan for retirement, one viable option is to look at stable foreign markets. MSN Money's Jim Jubak says economies based on natural resources, with stable currencies and governments that won't radically alter investment laws, can help keep your money safe.
Suncor Energy (SU, news, msgs). What I like most about the oil-sands boom in Alberta is that it's no longer a frenzy. Stock prices have pulled back from the ridiculous. Some companies have scaled back plans or delayed construction schedules. If critical components and workers aren't in ready supply, at least the squeeze has loosened a bit.
Suncor Energy holds proven and probable oil-sands mining reserves of 2.34 billion barrels. Independent reserve evaluations say the company's leases hold 15 billion barrels of refinery-ready oil. Actual oil-sands production, though, is expected to fall by about 4% in 2007 to 250,000 barrels a day as the company shuts some production for maintenance and upgrades. Standard & Poor's estimates that production will climb to 280,000 barrels a day in 2008.
I'm going to hold off buying any of these until the stock market gets over its current bad case of yips caused by the spike in long-term interest rates over 5.25%. I think this increase in rates isn't enough to end the bull market in stocks yet, but I think we'll need more of a sell-off before buyers come back seeking bargains. I'd be surprised if we didn't at least test 1,460 on the S&P 500 Index ($INX), an additional 2% lower from here.
Which one of these three I'll add to Jubak's Picks will depend on which looks like a bigger bargain when the damage has run its course.
Continued: Developments on past columns
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