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OPEC Lowers 2012 Forecast for Oil Demand

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    Wells Fargo chief portfolio strategist Brian Jacobsen weighs in on the energy industry.

  • Duration 3:23
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-- -- -- Looks like oil is in the dogs rather than in the barrels OPEC the organization of petroleum exporting lowering -- -- twelve forecast for oil demand.

Down a 100000.

Barrels from his previous projection -- also warning that the slowdown could carry and U 2013.

It's gonna Brian Jacobson chief portfolio strategist and Wells Fargo he's with us today it studio good to see you.

-- so the CEO it's about lowering demands what about -- Just as the most general question because the IMF cut its global forecast -- this was yesterday are we headed back into a recession globally largest parts of the world.

It's entirely possible I don't I wouldn't put a high probability on that happening though.

I actually think that next year will probably see around three and a half percent GDP growth for the world as a whole United States we could actually see 3% growth a lot of it hinges on politic -- on the United States.

-- -- if we hit that fiscal cliff or we fall off of that whatever the proper metaphor is.

Then we could actually go into recession I think that'd be short lived recession now.

Oil is -- -- 93 and a half dollars a barrel today but looking at your broad sectors in the S&P 500.

Energy is the second worst performing so far this year is only up roughly 5% all the worst next to the utilities.

Why is that if oil we've had oil prices that a sustained high you get good dividends out of these companies why aren't more people attracted to these big company.

I find that perplexing as well we've been recommending energy stocks all year because we actually do like it for that reason you get some decent dividends and I think you actually have the opportunity for dividend growth.

I think one of the big problems with energy companies in general is perhaps the regulatory environment it's really not all that clear.

How profitable these companies can -- with high oil prices and then also with the current environment in Washington DC.

So if we get a little bit more Claire -- as far as the regulatory environment.

And if we allow our US businesses especially to perhaps expand production friend that I think that we could see profitability follow and which case then I think that we've -- -- follow that the stock prices policies stick with them and mean it is slower demand environment that's being.

Forecast we talked about the odds of recession and all this kind of -- you stick with that strategy hey I do because one of the reasons why like energy is that they have to make a lot of investment obviously in their infrastructure and I do think regardless of who wins the election -- see some build out of the infrastructure to support the energy industry it's not just looking at oil producers it's also looking at refinery capacity but also natural gas let's face it the United States could be the Saudi Arabia -- the OPEC of natural gas in the future.

If we make the proper investments now.

-- that -- that dividend story and to the potential for tax increases that and the year again that uncertainty leading up in the last three months.

What of the broad sectors we hate -- asked what you'll avoid it well one of the areas that are really don't like is utilities and the -- big reason is is because blaster they ran up so much and I think that's why they are underperforming this year so we could see that continue.

And they also are very sensitive to changes in dividend tax policy so -- all of sudden we see the dividend tax trickle up to 43 point 4% for the top payers.

That could hurt them and I think -- that would be temporary though.

Because all -- think what a lot of people would do is than they would to shift the holdings from taxable accounts into non taxable like traditional IRAs for 41 case so you could see some volatility there.

But I actually don't think there's going to be a lot of dividend growth for utilities it's not exactly -- growing sector.

-- -- -- to see -- thank you very CO.

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