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Dan Dicker

Dan Dicker

Dan Dicker is a 25 year veteran of the New York Mercantile Exchange where he traded crude oil, natural gas, unleaded gasoline and heating oil…

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Look At Oil Majors As The Disconnect Continues

XOM

As a trader, you can sometimes get so frustrated with the market that you’ll do something impulsive – and stupid.

I call this the “Screw it!!” impulse.

It can come on suddenly, and make you move to double or triple down on stocks that are truly horrible and not likely to reward you, no matter how much commitment you have. With oil stocks not reacting very positively to oil prices, that instinct can be strong, as the disconnect between the two is truly unprecedented. With oil prices well above $64 a barrel here in the U.S. (above $70 for the more global Brent benchmark), most oil stocks should be roaring. But they’re not.

In fact, some of the biggest oil companies – like Exxon – are at price levels concurrent to when oil was trading nearer to $40 a barrel, not $70.

Exxon is an excellent starting point for assessing where our portfolios are, where they should be, and whether this instinct to say “Screw it!!” and push the rest of our chips forward is a reasonable one or a road to disaster.

In the ‘dark days’ of 2016 when Exxon-Mobil was also trading in the low $70’s and oil was at $40 a barrel, all of the major oil companies were dealing with maintaining dividends while slashing capex and debt at the same time. It would seem, even forgetting about the added profits of $70 oil versus $40 oil, that cash flow was a far tougher problem then. With nearly 3 years of hardship behind…

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