Eq: Energy

Eq: Energy (126)

Thursday, 02 April 2020 13:00

Oil Prices Spike on Rumored Deal

Written by

(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.

Monday, 30 March 2020 10:33

Oil Plunges Below $20 per barrel

Written by

(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.

Friday, 13 March 2020 11:29

There are No Winners from the Oil Price Plunge

Written by

(Houston)

Generally speaking, when oil prices fall it is considered good for the economy as it unleashes excess consumer spending. This is what happened in the last big drop in 2014-2015. However, this time around, there are likely to be no winners from the drop. Because the huge fall in prices is coming at a time of significantly reduced economic demand because of the coronavirus, it is hard to imagine that much excess economic activity will be created to account for the drop in oil-related industries.


FINSUM: Supply and demand are tumbling simultaneously across the economy (not just in oil), so it does not seem this will be a net positive like it has been in the past.

Monday, 09 March 2020 11:05

Oil Plunge is Leading the Charge Downward

Written by

(Houston)

Markets are plunging today, and the reason for the huge fall is the complete collapse of the oil market. The trouble is occurring because a price war is erupting in the oil market with Saudi Araba announcing that is was boosting production this morning. The move came as a response to Russia refusing to agree to production cuts to help insulate the market. The oil market responded by falling an eye-watering 30%. That immediately sent stocks plummeting too.


FINSUM: The market is doing its very best to compel Russia to agree to curb production. Surely a production cut wouldn’t cost them 30% of revenue!!

Monday, 10 February 2020 09:11

Citi Warns this Sector to be Hammered by Coronavirus

Written by

(New York)

There is a lot of focus right now on how great an impact coronavirus will have on the stock market, both locally and abroad. So far it has impacted stocks on certain days, with the effect immediately disappearing soon after. The reality is, however, that coronavirus’ impact may be uneven, with some sectors getting hit badly and others being fine, even as benchmark indexes might seem largely unhurt. We have already written about how luxury retail is hurting because of a lack of Chinese tourists, but now it is looking like commodities might be deeply wounded across the board. China is a huge driver of commodity markets as its demand fuels the market. And with the economy so shut down, commodity demand is going to drop off a cliff.


FINSUM: What is most worrying is that commodity prices don’t seem to reflect this at all, which means they are at risk of plummeting.

Monday, 21 October 2019 10:52

Warren Has Spooked Energy Markets

Written by

(Washington)

Elizabeth Warren’s ascendency to being the leading candidate for the Democratic presidential bid, coupled with her strongly leftist policies, has begun spooking various sectors. Energy is ground zero. The reason why is a tweet recently fired off by Warren: “On my first day as president, I will sign an executive order that puts a total moratorium on all new fossil fuel leases for drilling offshore and on public lands … And I will ban fracking—everywhere”. If that eventuality happened, it would greatly wound the US oil industry. Entire oilfield services industries would cease to exist in the US, and Canadian shale would be the big winner, along with huge oil companies, where the price gains from the tightened supply would offset other losses.


FINSUM: Analysts estimate this would send oil prices up around 60%, but it would really hurt the US oil industry.

Monday, 16 September 2019 13:49

Amazon to Be Hammered by Oil Shock

Written by

(Houston)

Oil took a phenomenal turn lower this week as news came out that half of Saudi Arabia’s oil production had been taken out via drone strikes. Yemeni’s took credit, but many suspect it actually came at the hands of Iran. Oil moved in a big way, up 20% at one point, representing the biggest percentage move in three decades. The drone strike is hugely consequential, as it removed 5% of the world’s daily oil supply. Airlines stocks were hit badly on the news, and Amazon may be the next big victim as higher oil prices mean higher shipping costs.


FINSUM: This big change is going to filter through markets in different ways, but the threat to Amazon seems real and very meaningful.

Thursday, 15 August 2019 11:40

Why Oil Prices May Be Headed Higher

Written by

(New York)

All the signs seem to point to commodity prices headed lower. Why you may ask? Pretty simple—the economy looks to be weakening, so demand will be lower at a time when supply will stay high. But no so fast, says Evercore, who argues that oil prices may be in for a counterintuitive rise of at least 19% by the end of the year. Evercore contends that production will be flat this year, as OPEC is curtailing output. At the same time, global monetary policy easing is likely to sustain demand, meaning the basic picture for oil may be more bullish.


FINSUM: We think this is an optimistic view that does not take full account of the worsening economic outlook.

Monday, 05 August 2019 10:50

Get Ready for a Big Commodities Drop

Written by

(Houston)

The Chinese Yuan reached a landmark and worrying level today. It fell to below 7 versus the Dollar, marking its weakest point in 11 years. The weakening currency could help Beijing offset economic weakness from tariffs. “We will see a new wave of depreciation among Asian currencies in the foreseeable future, and there could be further risk-off movements in the global markets. It looks like a tsunami is coming”, said an economist at Commerzbank. This will have major implications for commodities as China is the world’s biggest consumer, and now that the currency is weaker, it will be harder to buy, meaning prices must come down.


FINSUM: Dollar prices for commodities (almost all are priced in Dollars) will need to come down commensurately with the Yuan in order for the Chinese to maintain their purchasing power.

Thursday, 11 July 2019 08:16

It Might Be Time to Buy This Beat Up Sector

Written by

(Houston)

We know, we know, you don’t want to hear about oil. No one seems interested in the all-important commodity at the moment, but that is exactly why you might want to pay attention. Oil stocks have had a terrible decade—down 10% while the S&P 500 rose almost 300%, hence the derision they face from investors. Prices are so low that oil now composes just 4.5% of the S&P 500, very near to the lowest ever (in 1999). The big question investors need to be asking themselves is “is this peak pessimism”?


FINSUM: We think oil stocks offer some value right now, but what will be the catalyst to make them rise? A big economic boom seems unlikely at present. Oil missed this cycle and it is still oversupplied. We would stay away.

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