If you’ve taken advantage in the last two weeks to begin accumulating a long-term energy position, as I have previously suggested, we need to get a further understanding about how to manage that position and what I see as the likely timetable for oil and oil stocks. Here’s my latest “trade” report: China worries and a few quicker indicators that domestic production was beginning to slacken accelerated my timetable for investment that I laid out in my book, “Shale Boom, Shale Bust.” I now believe that the lows in oil have likely been seen, but that does not mean that…
As traders, investors and pundits, we all like to think that what we do is akin to a science. We believe that by working harder and being smarter we can give ourselves an edge, that enough research will reveal to us the next move, either a long term trend or an intraday blip on a chart, and that we can profit from that knowledge. Usually, especially over longer time spans, we are correct in that assumption. Sometimes, however, no amount of fundamental or technical analysis will help.Over the last week or so we have seen some violent swings in the…
After several years in which oil and gas companies moved quickly to plan, fund, and build LNG export facilities around the world, the LNG market is starting to show cracks. As with most projects based on the whims of commodity prices, there are boom and bust cycles. First off, LNG prices have crashed in part because of the crash in oil prices. But, LNG is also experiencing a bust of its own. Although there is no single market for LNG, there is suddenly an embarrassment of riches in terms of liquefaction capacity around the world…a trend that will only grow…
Politics, Geopolitics & ConflictIf nothing else, we have Yemen to thank for upwards oil price volatility. So while the Saudis continue to play their high-output game, keeping oil prices low, at the same time the Saudi troop incursion across the border into Yemen with boots on the ground is causing intermittent oil price spikes. Saudi troops have entered Northern Yemen and taken control of two areas in the Saada province, the Shi’ite Houthi stronghold. The war affects oil prices because a key focus here is on Yemen’s oil-rich Marib province, which supplies the capital, Sanaa, which is under the control…
October Crude OilTechnical Analysis(Click Image To Enlarge) October Crude Oil futures are in a position to finish the week higher after an impressive follow-through rally, following last week’s potentially bullish closing price reversal bottom chart pattern. Although the main trend is still down according to the weekly chart, the chart pattern indicates a shift in momentum to the upside.If the rally continues then look for crude oil to test the first two objectives at $50.20 and $51.25. Since the trend is down, sellers are likely to come in following a test of this zone. If the buying is strong enough…
After insane volatility in oil and oil stocks, a recap on the macro scene in energy and the few specific stocks need updating after this week's carnage (and only partial recovery). First, to the macro: Oil and oil companies continue to follow the timetable of destruction whose path began almost exactly one year ago today. Of the five major inputs to the decline on oil that I outlined in my book leading to oil's continuing price collapse, it is obvious that the Chinese GDP fantasy (and also the Yuan devaluation race) was the straw that broke oil's back on Monday…
Once a view takes hold among analysts and traders regarding a particular sector or industry it can be remarkably resilient.Usually the view starts based on logic and reality, but once it becomes conventional wisdom cracks can begin to appear in both areas. Objectivity disappears when every piece of news or change in conditions is viewed only from the perspective of how it could be bad for the stocks, and that often leads to contradictions that border on the ridiculous.The case against North American railroad stocks is an example. Obviously there are several factors that have caused the value of those…
Now that oil prices have plummeted to six-year lows – lower than the bottom oil prices touched earlier this year – everyone is starting to wonder whether or not the juicy dividends offered by some of the largest oil and gas companies are sustainable. After all, how can such generous levels of payouts survive a 60 percent drop in oil prices? There are several ways that oil companies can correct the hole in their balance sheets, aside from boosting revenues through higher production: cut costs, issue new debt and equity, sell assets, or cut the dividend. Since dividends have been…
Politics, Geopolitics & Conflict The Iraq Update The Kurds are once again going it on their own, selling oil unilaterally, bypassing the Iraqi central government of Baghdad, which cannot meet the financial commitments laid out in a deal that had temporarily resolved the oil dispute. Now, supermajor oil traders such as Vitol and Trafigura are locking in billions of dollars in Kurdish crude oil and shipments of this oil are becoming increasingly regular. Israel has been getting more than one-third of the Iraqi Kurds’ crude exports between May and August. From the Israeli side, this means it has been meeting…
The energy complex was volatile this past week, driven by outside factors and traditional fundamentals. The week began with crude oil under pressure because of a huge sell-off in global equity markets. The catalyst behind the selling pressure was turmoil in the Chinese economy following the previous week’s release of a bearish manufacturing activity report. Investors were looking for action from Chinese officials because the selling pressure and excessive volatility suggested that no one was steering the ship. The People’s Bank of China stabilized the markets on Tuesday when it cut its one-year lending rate and lowered the amount of…
