Eq: Energy

Eq: Energy (33)

Thursday, 08 November 2018 09:24

Oil Looks Set for Volatility

Written by

(Houston)

The oil market is nervous, which seems likely to lead to volatility. The surprise is that sharp moves may trend to the upside rather than the downside. The two big concerns are about how sanctions on Iran may crimp output, as well as how OPEC lacks spare capacity to boost output. Such concerns are a stark change from the attitude that accompanied the sharp price falls in recent weeks, when supply seemed to be expanding strongly.


FINSUM: The Saudis are saying they will expand production to a record, but the reality is they do not want to do so because they don’t want prices to fall. It seems like OPEC will walk a line to keep prices where they are.

Friday, 26 October 2018 12:11

We are Entering a New Era for Oil

Written by

(Houston)

The oil market has been in an interesting period since at least 2014. In the years prior, many had been worried about the concept of peak oil, or the idea that the world was past its peak output of oil and that supply would grow ever tighter. Then the shale boom happened and the world was suddenly floating in the stuff, causing prices to plummet. Now we are somewhere back in the middle as there are genuine concerns about supply at the same time as growing demand. Shale growth is slowing in the face of capital constraints and pipeline issues, and “The Saudis are just about out of spare capacity”, according to a top energy adviser.


FINSUM: We think the concerns over supply are legitimate enough that they will be supportive of prices even if we are slowly headed towards recession. That said, we think more supply will come to market to meet demand than many anticipate.

Wednesday, 24 October 2018 09:41

Oil is Plunging

Written by

(Houston)

Stocks fell around 0.5% yesterday after being down much more. Oil fell 4%. The reasons why are many, but mostly it seemed to be bad timing. Saudi Arabia announced it would pump more oil at the same time as the market is worried about economic growth and aggregate demand. Invesco’s chief market strategist summarized the situation best, saying “Markets have underreacted to tariffs, because they weren’t really tangible. Now it’s getting more tangible with the IMF lowering growth forecasts and showing up in what could be seen as canaries in the coal mine … That’s putting downward pressure on stocks and on oil”.


FINSUM: We feel like oil is too high for where it should be right now. That said, the geopolitical risks surrounding Saudi Arabia could have a directly negative affect on gross oil supply, which would be positive for prices.

Wednesday, 10 October 2018 11:03

Oil is a Good Bet for Rising Rates

Written by

(Houston)

You want to know an asset class that has performed well in periods of rising rates? Take a look at oil. In periods of quickly rising rates and yields, oil and oil-related stocks have done very well. In fact, Van Eck’s Vectors Oil Service ETF (OIH) has been the best performing fund of its type in such periods. “Shares in the VanEck Vectors Oil Services ETF saw a 6.5 percent boost over the month when rates jumped, while shares of the United States Oil Fund ETF ran up 4.5 percent”, according to Kensho.


FINSUM: Oil and banks tend to do well in periods of rising rates. The former because rising rates usually mean a strengthening economy, and the latter because of both an improving economy, but also wider net interest margins.

Wednesday, 10 October 2018 11:01

A Good Time for MLPs, says Goldman

Written by

(Houston)

It is a trying time to be picking where to allocate capital. Bonds are getting walloped and rate rises and trade war fears are weighing on stocks. Recession looms as a threat. With all that in mind, Goldman Sachs thinks it is a good time to buy MLPs. MLPs have been roughly flat this year, but GS thinks good times are ahead. Kinder Morgan is one of the bank’s top picks and they believe the sector will rise on improving cash flow and gains that result from simplifying their corporate structures (most will likely change to C-Corps following last year’s change in the tax code).


FINSUM: MLPs have been pretty flat and this is not the first time Wall Street analysts have called for a surge. Still, this is interesting to consider.

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