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____ Friday February 26, 2016 ____

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Chart of the Week

It's been a LONG TIME coming but we finally saw a year over year decline in US domestic oil production.

by Michael Hayhoe

Waterloo Region - US oil production peaked last spring at 9.6MM barrels a day. It dropped marginally last summer but then flattened out for months. However, it has finally started to turn down again, and more importantly, it has dropped below the previous year's production level turning year-over-year production growth negative. The 70% drop in price is finally starting to hit home.

Projections going forward show the pace of the drop accelerating with production dropping another 500,000 barrels a day by mid-year taking US production back to September 2014 levels.

High cost producers are curtailing production or shutting down. They have to. You can only sell your product at a loss for so long before the cash dries up and the bank comes calling. The strong low cost producers will survive this cycle, like they have in the past. In the meantime, the baby is being thrown out with the bath water and all energy stocks are being taken to wood shed. Now is the time to being buying energy stocks. Buy when there is "blood in the streets" as the old saying goes. If you aren't sure which companies are going to survive, invest with someone who does. Just make sure you invest before the cycle turns up again.

Mike Hayhoe, BSc, CIM® is Branch Manager & Senior Investment Advisor at Independent Wealth Management
Canaccord Genuity Wealth Management

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