One prominent oil investor says the commodity has some of the strongest tailwinds in recent decades, but lagging energy stocks don’t tell that story.  

Eric Nuttall told BNN Bloomberg on Monday that the past few years have been good for energy investors, but many have fresh memories of a difficult period that preceded the more recent sunny trends. As a result, many investors “just don’t want to get hurt again.” 

“They see US$90 and they say, ‘Well it's just because of Saudi (Arabia), it’s just because of OPEC+ cuts.’ They don’t realize that this is the strongest fundamental market I think I've seen in my 20 year career, but the stocks have been lagging,” said Nuttall, partner and senior portfolio manager at Ninepoint Partners. 

West Texas Intermediate (WTI) oil prices hit $90 per barrel earlier this month following efforts by OPEC+ to reduce oil output. WTI closed at $89.95 per barrel on Monday afternoon

Nuttall said he believes oil will trade in a range between roughly $85 and $105 per barrel. He argued that $90 per barrel will provide “the most unbelievable environment for free cash flow” for energy companies, and that will be reflected in those companies’ share prices.

“We are not calling for $150 (or) $200 oil in the next year. We do think there is a ceiling, but then when we really factor in energy stocks there’s just such a massive disconnect,” he said. 

Nuttall said the free cash flow that is now being generated is the “highest in history.” 

“The balance sheets of these companies are the strongest in history,” he said. In the near future, Nuttall said “they'll finally get to their final debt targets. They'll trigger 75 to 100 per cent of that free cash flow coming back to us.”