Are the local downstream energy stocks oversold? The catalysts for the sell off in energy stocks worldwide are well known albeit for many investors of little consolation as it has been steep and painful. If this is of any consoldation, I noticed that some of the smaller downstream service companies in the US have fallen by as much as 60%. So a 20-30% drop here is half the pain

Many theories abound with regards the outlook for oil and its short medium and long term price. To have a sense of direction, it is important to understand that this time in a simple way, price will be determined by the fight for market share between crude and shale gas. Yeah demand have slowed a bit so adding to the dislocation but nothing comes close to the supposed david goliath fight looming.

Put simply, it will be a fight between crude and shale gas or OPEC (well, okay all fossil oil producers) against the new power players in shale gas, US and Canada.

Who wins or losses, to me, is less a concern than at what price will there be a 'truce' between the two ie stabiilize or equilibrium? If numbers provided by analysts are correct, shouldntt one start thinking forward in terms of a supply contraction? High costs tar sand Canadian producers - estimated of between $70-$100 per barrel - are already under water vs spot energy prices. What about this magical shale gas theory? Why should we take for granted supply number quoted? Shale gas fields have been shown to deplete at shocking rates as I have read articles where outputs of gas have come in at only 10% of original estimates and have exhausted itself within 3-5 years well outside of the original projected life of project. When crude oil fields can be milked for 20-30 years, what kind of shift are they referring to when they say supply demand dynamicst? Confused? I don't know about you but yes I am!!!!

As an investor, I am intuitively inclined to believe that sell-offs should be appreciated as returns can be very rewarding. Herd behaviour as we all know are irrational. It is all about highly charged trends and momentums.

So in situations like this, I take a dispassionate read of the situation. It always never hurts. A seemingly rational plausible explantion of correlationships - from $300 peak to $40 in 3 -4 years if my memory have not failed me . .... well, from experience may not always be the case. Right now, somehow I sense that the projections of oil direction look odd.

All I see now are that energy stocks like Muhibbah, THHeavy, Armada, SKPetro appear to be finding or forming a bottom. Whether it is intrinsic valuations or just exhaustion of selling pressure I can only guess. Only time will tell, if one again fell for the same old tricks - the gloomy big macro viewr or predictions that such prognostications that we lap up hungrily and regret later because these turn out to be completely wrong.

Maybe those who made money from past crisis are happily picking up stocks.

Drat!!! those guys are good!