Oil & Gas: Cheap Tricks
As of this week, we are the proud producers of “freedom fuel”, the successor, it would seem, to “freedom fries”; or going back to the WWI era, ”Liberty Cabbage”, which replaced “sauerkraut”. It’s an overused and unoriginal title that represents fear.
But for investors, adding “freedom” into the fuel mix label is not helpful--it’s a cheap gimmick from cheap minds that cannot defy this basic truth: It’s going to take quite a lot of nerve to jump into energy stocks right now, as prices slide on geopolitical factors and despite (finally) a lower showing for US crude inventory this week.
If you’re looking at oil stocks right now, you’re looking at some pretty poor beats--in terms of price, earnings and expectations, and it’s all about exposure to overseas markets. That means that oil services companies are seeing the worst of it, while it is still possible to find more narrowly focused drillers who don’t have the same revenue exposure. It is, though, a double-edged sword because the drillers are extremely sensitive to weak oil prices, and adding “freedom” to brand label on American fuel isn’t boosting anyone’s confidence. (Indeed, money managers have reduced their net long position this month as bets that prices would rise were liquidated, and oil was set for its biggest monthly plunge downward in half a year,…