Byte #38: Why I'm Bullish Energy Amid the Glut

For much of the past year, the dominant narrative around oil has been one of oversupply and fading relevance. But that framing increasingly ignores the structural shifts taking place beneath the surface.

As energy expert Arjun Murti puts it:

“We think we have pushed back on the ‘oil glut’ narrative enough that we don’t need to write a treatise on it… between the latter portion of 2025 and the first half of 2026, oil markets would experience a modest oversupply but not a glut…oil prices would rebound in 2H2026 or 2027. This remains our base-case.”

Here are the key reasons energy deserves a fresh, unemotional look today:

1. The “oil glut” is cyclical, not structural

Yes, inventories may build modestly in the first half of the year. But this looks more like a temporary clearing phase than a long-term surplus. Supply growth is already slowing...and that matters far more than near-term noise.

2. The world has entered a post-shale era

From 2012 to today, the U.S. accounted for roughly 117% of total non-OPEC supply growth. That extraordinary run is ending, and markets are still anchored to assumptions from that shale-abundance regime.

3. U.S. production has likely peaked

Recent EIA (Energy Information Administration) data shows U.S. production down roughly ~300,000 barrels per day annually (vs. 1-2M bpd peaks), reinforcing broader forecasts that U.S. supply growth is leveling off.

4. The largest incremental supply source is fading

Without U.S. shale acting as a swing producer, global oil markets lose their biggest buffer against demand surprises. That fundamentally tightens the medium-term outlook and creates a supply and demand mismatch.

5. Capital discipline has reshaped the industry

After years of disappointing equity returns, energy companies shifted focus from growth-at-all-costs to free cash flow, balance sheet strength, and shareholder returns. Exploration budgets were cut, and long-cycle projects deferred...reducing future supply optionality.

6. Exploration capability has eroded

Years of underinvestment have led to a loss of geological expertise and weaker exploration results. Even if capital returns, rebuilding that capability won’t be quick or cheap. Next projects probably need $70+/barrel to pencil.

7. Supply growth narrows to fewer players

Incremental barrels largely hinge on Guyana, Brazil, Canada oilsands, and Argentina regions with long-cycle timelines and execution hurdles, unlike shale's rapid response.

8. Demand hasn’t disappeared

Global oil demand has not collapsed. As global GDP improves and inventories normalize, demand resilience becomes more visible...especially in a world still structurally reliant on hydrocarbons.

9. Inventories are a reset, not a ceiling

Once the current inventory build is worked through, the market will need to answer a harder question: What oil price is required to justify the next wave of multi-billion-dollar projects? That price is likely higher than what energy equities imply today.

10. Energy equities remain priced for the past

Despite these structural shifts, much of the energy sector still appears valued as if supply remains abundant and easily scalable. That disconnect may create a compelling long-term setup for patient investors. Energy remains a smaller part of major indices and typically trades at more conservative valuations, even during strong cycles.

What’s Next

I’ll continue this energy discussion next week, where I’ll start evaluating specific investment ideas through this lens.

I’ve previously alluded to midstream anchors like EPD, OKE, and MPLX...businesses delivering reliable yields with less cyclicality...as well as upstream standout CDDRF, which doubled my money in under a year despite 2025’s oversupply headlines.

Yet energy still deserves fresh attention now: we’re approaching a phase where the current glut fades, supply growth slows further, and oil prices may rise...rewarding resilient cash flow machines even more.

This isn’t a recommendation to buy or sell…it’s about stress testing thesis amid noise.

Keep investing smarter,

Pooja