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September 19, 2023

Black Gold

The oil price has rallied more than 30% since mid-June with the global benchmark brent topping 95 USD for the first time since November last year. The physical market is tight as refiners struggle to make enough diesel ahead of the seasonal ramp-up in demand. Saudi Arabia and Russia are curtailing exports. The economic outlook for the US looks solid and the one for China could be slowly improving. An oil price heading back to 100 USD is obviously bad news for inflation but good news for investors in energy stocks like we are. TotalEnergy for example trades now at 6.9 times 2023 expected earnings and carries a dividend yield of 4.8%, a clear undervaluation at a moment fundamentals are improving.