Displaying items by tag: shale

(Houston)

Energy prices are rising from the U.S. to Europe, and while that might spark a good upside for energy companies it’s causing a crisis for those reliant in Europe. BSF SE and Aurubis AG are the continent’s number one producers in chemicals and copper respectively, but energy prices are eating at their margins. Major U.K. fertilizer companies are shutting down plant production in Norway. Gas prices are up nearly 200% in Europe and input costs have doubled as a supply crunch ravages the West. This shortage is painful on the frontside with high input costs but on the sell-side as well. Higher energy costs are eating up a larger percentage of home budgets and curtailing retail spending. Goldman Sachs expects the calamity to continue into the winter and warns of blackouts if consumption isn’t curbed. Finsum: This is the time to up the stakes in American energy prices. Energy shortages aren’t good for anyone but oil and gas are release valves.

(Houston)

When you think of oil, you don’t normally think of an industry that would gain from a big win by Democrats in an election. But as it happens, oil could very well gain if Democrats sweep the presidency and congress. The reason why is slightly perverse, but that makes it no less relevant. The concept is that Democrats would be bring new regulation around fracking; specifically, regulations that limit new drilling but allow existing projects. What this would mean is a steady rise in prices as inventory becomes constrained as the recovery proceeds. For example, Morgan Stanley is forecasting almost a 100% gain in natural gas prices next year.

FINSUM: Oil and gas are a physical supply and demand market, and if regulations keep supply in the ground, then prices will rise.

(Houston)

The oil market has been the story of the week for markets. The price of black gold fell to -$37 dollars on Monday. The market would technically pay you to take oil off its hands. Even at $20, most of the US oil industry is out of business, so what can the President and the government do to save the market? There are several options. For instance, the government could buy a hundred million barrels of oil for its strategic reserve, or it could create new storage space. However, the option the markets favor is for the government to buy mountains of oil while it is still in the ground, and have producers pay them back as they extract it.

FINSUM: If the government wants to save the US oil industry from a mass bankruptcy—and resulting rupture in the high yield market—it will need to take action.

(Houston)

The sole bright spot in markets today is the big jump in oil prices. US oil rose about 10% earlier today on an announcement by President Trump that a deal between Russia and Saudi Arabia was close. The two parties have ben locked in a price war, which alongside the virus, has conspired to bring oil into the teens from a high of around $63 per barrel in January. Trump says a deal could happen within a “few days”.

FINSUM: Oil hit an 18-year low this week. In our opinion it is only a matter of time until oil producers come to an agreement to try to fix prices higher.

(Houston)

If there was ever a time to take a hard look at investing in oil, this might be it. Black gold just hit an 18-year low, falling under $20 per barrel. Evidently, in physical oil markets, barrels are already changing hands for $10 each. The market is grappling with a price war at the same time as a massive glut of excess oil at a time of sharply shrinking demand.

FINSUM: Two thoughts to weigh here. On the one hand, oil was recently at $63 a barrel (in January), so this is a very substantial fall, which means a potentially great buying opportunity. On the other hand, oil is not nearly as scarce as many thought at the start of the last decade, so it is not inconceivable that prices could stay low for a long time.