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Premium Article Archive

  • Basic Arithmetic Letting Oil Companies Down

    Sesame Street is better at math than the oil companies are right now. Virtually every midsized oil exploration and production company has recently claimed not only to maintain production levels for 2015, but to increase production in the next year, all while slashing capital expenditure budgets to the bone. That math doesn’t compute at all: Where is the Sesame Street “Count” when you need him? It really is as simple as 1, 2, 3…. This week after capex slashes were reported from several US oil companies, including a stunning 75% drop in the budget of Abraxas energy (AXAS), Canadian oil…

  • Strike While The Majors Are Cheap

    This big collapse in the price of oil that has occurred in the second half of this year is the result of a combination of factors. Dollar strength as other major economies, such as Japan and Europe, face problems has played a part, as has some worry about a slowing of global growth. If the numbers are to be believed, though, the single biggest factor has been the increase in supply as unconventional wells, most notably in the U.S., have come on stream. Understanding that this is principally a supply shock is important for investors as it determines strategy for…

  • The Latest Hot Spot For Offshore Oil

      Oil prices may be lower than they have been in over a half decade, but that hasn’t slowed the interest in Canada’s oil reserves off of its east coast. A consortium of companies just submitted a bid for the parcels off the coast of Newfoundland, Canada’s largest ever bid for offshore blocks. Led by ExxonMobil (NYSE: XOM), the group bid $559 million for the rights to 266,000 hectares in the Flemish Pass, a stretch of water east of St. John’s. ExxonMobil has a 40 percent working interest, with Suncor Energy (NYSE: SU) and ConocoPhillips Canada Resources (NYSE: COP) each…

  • Global Energy Advisory - 19th December 2014

    Politics, Geopolitics & Conflict The Sudans: Where Oil Fits in A year ago this week, South Sudan became embroiled in a civil war that has so far killed tens of thousands of people and put paid to its embryonic independence from Khartoum. It started when rebel forces targeted South Sudan’s oil fields shortly after fighting broke out in the capital, Juba. At stake is control of some 75% of all of Sudan’s oil production. The situation in South Sudan was already unsustainable due to the civil war (production had already dropped from 350,000 bpd to 160,000 bpd), and now with…

  • Subtle Signs Emerging That A Bottom Is Near

    Crude Oil OutlookOversupply continued to make it hard for crude oil to find a bottom last week although technical analysis factors did manage to help halt the slide at $53.94 at least temporarily. The bottoming action was strong enough to take out the previous day’s high for the first time since November 21. This doesn’t mean much to the big picture, but prolonged short-covering rallies have started from this simple chart formation. Other than bouncing off a five-year low, the crude oil market was very tame this week. Volatility was low and the price action was orderly. This may be…

  • The Blood Letting Has Only Just Begun

    One steady reader of mine has questioned my recent analysis: While being positive on oil up until the break below $82, I’ve now become one of the most negative in the space as oil nears $60. He wondered aloud to me whether I’ve lost perspective. But have I? Hardly. One of the incredible attributes of this oil market is its ability to breed selling as it goes lower, precisely because it puts more and more of US and Canadian production at risk. How much at risk? Most of my pessimism on oil as it nears $60 a barrel is contained…

  • One Trade That Doesn’t Need Oil To Recover

    Attempting to pick the bottom of oil’s move down has so far proven to be an expensive game for energy investors. The $60 WTI level that we are rapidly approaching as I write was the launching point for the spike in prices that occurred in 2007, as the chart below indicates, so may at least provide some support as the year ends. For investors who believe that could be the case, there is a good trade opportunity if that does turn out to be a good support level, but that also has the potential to pay off even if prices…

  • Will Low Oil Prices Shatter LNG Hopes?

    Introduction As 2014 draws to a close, the oil markets are in free fall, leaving energy investors with few good options. Oil prices are now at five-year lows with no indication that they will recover in the short-term. Even worse, the pain from low oil prices is rippling through other markets, including the global liquefied natural gas (LNG) trade. In fact, LNG investments are looking worse than they have in years. That is because prices for LNG in Asia – where much of the global growth is expected to come from – are linked to the price of crude oil.…

  • Global Energy Advisory - 12th December 2014

    Politics, Geopolitics & Conflict Somalia has invited Soma Oil and Gas, ExxonMobil, Royal Dutch Shell, BP and Chevron to explore oil and gas resources in the country. Soma Oil and Gas—based in the UK and backed by Russian billionaire Alexander Djaparidze--has completed an onshore and offshore seismic survey in the Somali capital, Mogadishu. The government in Mogadishu said it would reward the company for carrying out the seismic survey with licenses to explore for oil. This is a daunting endeavor in a country where security remains shaky at best and where al-Shabaab is clearly resurging. Attacks by the Islamist militant…

  • Don’t Feed The Bears

    Crude Oil Outlook Support for crude oil futures continued to erode last week after the release of another bearish supply/demand report. Although the latest Commitment of Traders report showed speculators increased bullish bets, the size of the increase wasn’t enough to stem the decline in prices. According to the latest weekly supply/demand report from the U.S. Energy Information Administration, crude oil inventories rose by 1.5 million barrels the week-ended December 5. This came as a complete surprise to traders who boosted long positions in anticipation of a 2.6 million barrel decline. The latest CFTC Commitment of Traders report showed that…