sharetrader
Page 1 of 2 12 LastLast
Results 1 to 15 of 22

Thread: Oil

  1. #1
    Senior Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,084

    Default Oil

    It looks like oil is going to have some pressure. Intense volatility also can be expected

    https://www.reuters.com/article/us-g...-idUSKBN1IC033

    Oil prices fall as Iran nuclear deal retains support

    https://uk.reuters.com/article/usa-rigs-baker-hughes/update-1-u-s-drillers-add-oil-rigs-for-sixth-consecutive-week-baker-hughes-
    idUKL1N1SI1A5


    UPDATE 1-U.S. drillers add oil rigs for sixth consecutive week -Baker Hughes

  2. #2
    An Awesome Cool Cat winner69's Avatar
    Join Date
    Jun 2001
    Location
    , , .
    Posts
    21,297

    Default

    Quote Originally Posted by Valuegrowth View Post
    It looks like oil is going to have some pressure. Intense volatility also can be expected

    https://www.reuters.com/article/us-g...-idUSKBN1IC033

    Oil prices fall as Iran nuclear deal retains support

    https://uk.reuters.com/article/usa-rigs-baker-hughes/update-1-u-s-drillers-add-oil-rigs-for-sixth-consecutive-week-baker-hughes-
    idUKL1N1SI1A5


    UPDATE 1-U.S. drillers add oil rigs for sixth consecutive week -Baker Hughes
    Where does the cash come from for all these new rigs?

    How indebted are these oilers these days .....esp the shale producers
    ďI know that I am intelligent, because I know that I know nothing ď ó Socrates

  3. #3
    Senior Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,084

    Default

    In my view, current oil spike wonít last. We could see intense volatility followed by low crude prices toward second half of this year and 2019.US shale oil is heading to UAE as well. They are spreading.

    http://www.arabnews.com/node/1300306/business-economy

    Who are the winners and losers from US oil sanctions on Iran?

    https://www.economist.com/news/busin...-producers-are

    American shale-oil producers are on a roll

    https://gulfnews.com/business/sector...sure-1.2217308

    Shale boom to keep oil markets under pressure

    https://www.barrons.com/articles/oil...EditorsPicks_0

    Oil: Higher, Then Lower
    Last edited by Valuegrowth; 12-05-2018 at 06:46 PM.

  4. #4
    Senior Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,084

    Default

    U.S. oil production recently broke another record, jumping over 10 million barrels per day in the last week in April. Permian production (west Texas) is expected to double between 2018 and 2023 nearly as much oil as Iraq, OPECís second largest producer. Many expected increases in supply will come from shale, oil sands and other non-conventional supplies. But much of the oil additions will come from solely from the Permian during next five years.

    https://www.dallasnews.com/business/...d-supply-world

    https://www.cnbc.com/2018/01/30/exxo...n-by-2025.html

    https://www.bloomberg.com/news/artic...e-more-to-give

  5. #5
    Senior Member upside_umop's Avatar
    Join Date
    Jun 2007
    Location
    London, United Kingdom
    Posts
    1,184

    Default

    Gidday VG,

    Good thread to start up. I started moving my chips deeper into the oil sector again last year when OPEC reached an agreement with Russia. The oil world has many moving parts but I believe that this relationship is key. A few random thoughts that ran through my head when this was announced:

    - Saudi Arabia intends to list Saudi Aramco and wants oil higher and prove they can control the market.
    - Russia wants to please Saudi Arabia to increase influence.
    - Saudi Arabia is arguably the United States most powerful ally in the Middle East.
    - Everyone in the world wants Saudi Arabia to have a successful transition from a state funded oil model to a modern, less subsidised etc economy.
    - Other state funded oil models will also participate and watch with interest to replicate, if successful, themselves.

    Shale oil
    This is an interesting one and a bit of a black hole to me and should be to everyone. Everyone knew that shale would respond to higher prices but a lot of questions remain such as:
    - Is the permian 3.0 with higher flow rates translating into higher EUR? - I see reports of both side saying yes and no.
    - Have the best well locations been drilled?
    - Can they contain costs? (Sand, water, fracc teams etc)
    - Will shareholders let them drill forever with no capital returns? They may start "cash cowing" which doesn't fit the shale model too well if you want growth without too much debt (next point).
    - Can shale co's obtain attractive financing? A large number of oil co's and oil service co's filed for bankruptcy over the 2014 to 2017 downturn and they financiers suffered. Will they be willing to take that risk again?

    Demand
    You should also consider the demand side of things. We are in classic late economic cycle - people are feeling rich with increased asset values and living the good life. If economic growth continues, expect oil demand to keep increasing.
    - Oil demand is increasing with growth forecast at 1.5 mbbls a day by the all conservative IEA. Goldman Sachs thinks it's 1.8 mbbls a day.
    - China is now the largest importer in the world importing over 9 mbbls a day and growing; their state oil companies have declining production aswell.
    - EV's will have minimal disruption over the medium term.

    Then you have sanctions, geopolitics, hundreds of billions of under investment in oil projects since 2014 etc etc. Imagine what would happen if a missile actually hit some Saudi production.

    In anycase, the forward oil price curve certainly agrees with your forecast. The market sees oil prices falling away into the low 50's by mid 2020's. The low oil camp will undoubtedly be wrong, just like the camp that extrapolated $100 oil was wrong....

    Where are my thoughts? Similar to yours - probably higher on average in the short / medium term but volatile over the long term. $70 to $80 feels about right. The oil market is finely balanced and a million or two bbls under / oversupply can cause wild swings.
    By the way - it's upside_down, not upside_umop

  6. #6
    Senior Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,084

    Default

    Thank you upside imop for the detailed explanation. When oil dropped below $35, it was an attractive buy. When something special dropped very badly, buying them aggressively could lead to great results with minimum risk. Financial oil traders, Hedge funds and money managers also could change the direction of the oil market base on the information that they get and strategy that they follow. After some time, there are lot of speculation and predictions on oil these days. So, I get some mixed signals. Going forward volatility, short term spike and sell off could be new normal for USD, commodity currencies and commodities.

  7. #7
    Senior Member upside_umop's Avatar
    Join Date
    Jun 2007
    Location
    London, United Kingdom
    Posts
    1,184

    Default

    No worries, good chat. A number of factors to consider and I only touched on some of them. I do find a number of articles are "fake news" and full of bias. It's especially true when comparing OPEC, IEA and EIA comments.

    In any case, oil is a great market to analyse from an economics standpoint as you can see price elasticity of demand / supply in action; when there is an over / under supply (or demand) prices react in a highly leveraged way. A couple percentage points of supply taken out of the market with a couple percentage points of increased demand has increased prices by c. 80% over the last year.

    For me, oil is definitely not a "buy and hold" and needs to be traded over the economic cycle. I believe the 18 month forward curve is too pessimistic on oil price and expect it to be somewhere north of where we are now. Beyond that, and depending on economic growth, it could have pressure to the downside....

    Disc: I'm fairly loaded up in oil stocks so assume I do have some bias!
    By the way - it's upside_down, not upside_umop

  8. #8
    Senior Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,084

    Default

    Some oil related companies could bankrupt during next 10 to 20 years. Strong balance sheet firms will stand out from the rest in this sector too. However, there could be speculative driven oil related companies as well which is similar to gold stocks. Oil and gas exploration companies (E&Ps) could exhibit large variations in earnings. Moreover, their primary asset, oil and gas reserves, is accumulated through highly risky exploration activities. In contrast, integrated oil and gas companies could have lower variability in their earnings due to more diversified asset base. Strong balance sheet firms in this sector will face any type of competitions successfully in the future and they may do some acquisitions as well. If I am correct one top Oil Company missed first-quarter earnings estimates as chemical and refining weakness overshadowed surging oil prices. I saw somewhere that the most important item when analyzing Oil company balance sheets is debt.

    https://www.bloomberg.com/news/artic...lion-oil-giant

    The 130-Year-Old Bankruptcy That Created a $5 Billion Oil Giant

    BP and Royal Dutch Shell plc (RDSB.L) had some good support over the last month.I think there could be some rally for selected oil stocks as well. Good luck!
    Last edited by Valuegrowth; 15-05-2018 at 08:32 PM.

  9. #9
    Senior Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,084

    Default

    https://www.bloomberg.com/news/artic...-tensions-rise

    Oil Drops as Traders Assess Surprise Stockpile Build in the U.S.

  10. #10
    Senior Member upside_umop's Avatar
    Join Date
    Jun 2007
    Location
    London, United Kingdom
    Posts
    1,184

    Default

    https://www.bloomberg.com/news/artic...ventories-rise

    Oil Reaches Highest Since Late 2014 After U.S. Surplus Shrinks

    By Jessica Summers
    16 May 2018, 01:17 BST Updated on 16 May 2018, 20:24 BST




    • U.S. crude, gasoline, diesel stockpiles dropped last week
    • Market-watchers bracing for U.S. summer driving season



    Which do you believe? Yours above or the latest above? The reporting on this is so rumour and micro focused it doesn't look at the big picture....
    - Opec targeted cuts of 1.2m bbls a day. Has smashed almost every month. April was 1.9m bbl a day!
    - Demand growth is the strongest since 2011. Demand growth this year will be equivalent to the last three years, apparently...China production is on the decline but continues to consume large quantities as they grow. They import 9m bbls a day! 10 years ago it was less than 4m bbls.
    - Supply constraints in the US. 18 months to fix?
    - Iran and other geopolitical factors
    - Demand destruction? I don't think so. Inflation has eaten away at around $10 a bbl since it was last at these levels and the world is less leveraged to oil for growth now too. i.e. 2011 $65 oil is probably more like $80 oil in 2018.

    Sometimes it's best to go against markets when they're most bullish but I feel slightly different for oil right now. Difficult to say it's a sell - maybe Trump will surprise an do a U-Turn on Iran? He had a poke at high prices last month but then again, high prices is something he can take credit for in the South, right?

    In anycase, I was happy for the IEA to come out with a bearish demand forecast for oil. Understand some of their points but can't believe how biased they are....they said oil was over valued at $50, $55, $60, $65 etc etc....they won't let it go.
    Last edited by upside_umop; 17-05-2018 at 09:34 AM. Reason: China links
    By the way - it's upside_down, not upside_umop

  11. #11
    Senior Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,084

    Default

    We get quite a lot of reports on various commodities very often but as I said I get mixed signals from them. Short term direction of any asset can change suddenly and unexpectedly but mid and long term direction could have completely different direction. Other than fundamentals, speculative bets also could impact commodity prices. There had been some strong short term bounce for individual commodities despite having weak commodity market over the last three years. Iron ore was one such commodity. It seems oil has got some energy this time. Despite well supply, still individual commodities can have at least short term bounce at different times due to various factors. I am continuously doing some study on behavior of commodity, USD and commodity currencies. I noticed USD correlation toward some commodities are also is not working these days. In other word there are some weird things are also happening. They have become new normal.Currency traders are also in disadvantage as correlation has broken. Overcrowded things including overcrowded stocks could fall dramatically as they have extended so much.

    When gold became heavily crowded they dropped significantly and still struggling to find a base. Some predicted even gold to come down to $500 and oil to $25. Sorry for things I wrote which is not relevant to oil but I want to elaborate broader market. In the meantime oil ministers from both the United Arab Emirates and Saudi Arabia have reaffirmed on Thursday their commitment to ensure the steady supply of oil.
    Last edited by Valuegrowth; 19-05-2018 at 06:57 AM.

  12. #12
    Senior Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,084

    Default

    Even if oil prices drop and average at around $55, still Russia and Saudi Arabia will make money. Their current situation is very strong and their economics also will become strong. They don’t have to sell below $45 now. They are the top winners at the expense of average consumers. Other day when I was listening to the radio, different types of oil consumers want to cut some of their traveling in the wake of rising oil above $70. It means demand for oil will come down if oil stay above $70. Very interesting period is ahead for commodities and I don’t rule out some sell-off as well specially from June onwards.

    https://www.nzherald.co.nz/business/...ectid=12056258
    Last edited by Valuegrowth; 27-05-2018 at 08:59 PM.

  13. #13
    Senior Member Valuegrowth's Avatar
    Join Date
    Jun 2013
    Posts
    1,084

    Default

    For oil business both Saudi and Iran like to stay in the same table. On political ground they are against each other. Finally,OPEC and allies including Russia going to boost oil production starting next month, offering relief to consumers. This deal is enough to keep oil just under $70 a barrel and probably could average in a range $55 to $65 in 2018/19. Saudi Arabia and Russia together pump about 21 million barrels a day or one fifth of global supply. Saudi Arabia and Russia could return the most oil to the market as they are two top oil producers in the world and their dominant in the industry. These two will benefit most even if oil trade $50 as their turnover is high in the oil world.

    Traders send the oil prices higher after oil meeting on the basis of vague outcome. It is a kind of short term speculation. Oil prices should come down gradually with increase oil production, slow demand and trade tariff. Besides lot of commodities went up on the basis of short term speculation and they have been correcting from their recent high. On fundamental ground commodities are well supplied. New emerging commodity producing countries are also increasing their output and yield now.

    In short, my prediction on oil average price $55 to 65 may materialize. There is a possibility to test $50 again in the coming months. One intelligent top investment house is seems to be right at this occasion. We will wait and see.

    Going forward I donít rule out volatility as well.

    https://abcnews.go.com/International...utput-56081889

    The Latest: OPEC agrees to increase oil production

  14. #14
    Senior Member
    Join Date
    Sep 2009
    Posts
    948

    Default

    Phew that's lucky.Otherwise it was going to lead to higher inflation,higher interest rates.All sad for shares.

  15. #15
    Update Ready To Install
    Join Date
    Aug 2010
    Location
    Floating Anchor Shoals
    Posts
    6,882

    Default

    int that USA is about to become the biggest producer with Russia and Saudi close behind, All that new horizontal and forcing tech has done it. How sustainable it is more of a ?.

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •