Kiss of death.

 

Madonna surprised Drake (and everyone watching) with an intense and exaggerated make-out session during his closing set at Coachella this past Sunday - but Drake's look of disgust following the x-rated kiss seems to have attracted more of the attention.

 

At first glance, it seems as if Drake (real name Aubrey Drake Graham) didn’t appreciate the kiss, wiping his mouth promptly with a look of disgust and confusion. Was this how he really felt or was he just caught off guard? We’ll never really know but having the queen of pop on your bad side is bad for business… so Drake went on damage control shortly afterwards, posting a photo of the surprise make-out session with the message: 'Don't misinterpret my shock!! I got to make out with the queen Madonna and I feel 100 about that forever. Thank you @madonna'

 

It’s these sorts of surprises that force natural knee-jerk reactions from within us – generally showing our true colours. Think back to the Fall when we were first hit with the oil debacle. Some of us thought it was a minor blip while the rest of us acknowledged it as a kiss of death and wiped our mouths with looks of horror and confusion – sparking conversations about if this was an oil crisis or an oil opportunity, where/when the bottom would hit and what the new normal would be.

 

This week, WTI recorded its strongest weekly gain since February 2011, and Brent posted its best one-week move since March 2009. Looking at the WTI crude oil’s six-day winning streak through Thursday, and the 28% rally off the bottom have energy investors breathing a sigh of relief and wondering if we’ve begun to carve a bottom. So what’s moving the market? Multiple factors have a hand in boosting oil:

1. A lower-than-expected build in U.S. inventories;
2. New forecasts of upcoming US production declines by the Energy Information Administration and OPEC;
3. The increasing likelihood Iranian supplies won’t hit the market until 2016, and the possibility a nuclear deal could be thwarted;
4. A takeover of a major Yemen oil terminal by militants;
5. Expectations of slightly higher demand for OPEC oil; and
6. A shift in sentiment as more traders seem to believe the oil market bottom is in the rear-view mirror.

RBC Capital Markets’ energy analysts anticipate OPEC will “stand its ground” by maintaining supplies. Sharply lower non- OPEC supply growth should rebalance the market during the next few months. While RBC Capital Markets’ updated 2015 oil price forecasts stand just below current levels, our analysts still call for further price recovery in 2016, and continuing over the longer term. RBC Capital Markets forecasts average prices for WTI crude oil of $41.50/bbl in Q2 2015, $55.31 in Q3, and $70.16 in Q4. Click hereto read more.

 

Four months ago, my go-to analyst suggested that it may take longer than the end of 2015 for prices to recover; he now thinks the consensus has moved to mid-2016, but he still fears it may take significantly longer than this for oil ultimately to recover (and he would not entirely rule out that $50 to $70 is the new $80 to $100). This dynamic will have very positive ramifications for some (the U.S. economy) and not so positive ramifications for others (Canada) – further emphasizing the importance of geographical & sector diversification amongst your portfolios. Technically, we appear to have seen a bottom, so this is a positive development...but there are so many variables at play that we can never be too sure – just like we’ll never know what Drake was really thinking. Apparently – he liked the kiss - it was merely her lipstick that turned him off, explaining the foul look on his face…