Displaying items by tag: energy

(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.

(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.

(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.

(Los Angeles)

One of the most disruptive technologies in industry might not seem that disruptive—batteries. Yet advances in batteries are about to reshape many areas, not least of which is the power grid. Home energy storage and car battery power are two of the biggest areas of disruption, and investors need to understand the dynamics in play. Better batteries mean less energy costs as power can be stored to smooth out demand-based pricing. It also makes electric vehicles legitimate, and possibly cheaper competitors to gas vehicles. Additionally, improved energy storage makes renewables profitable.

FINSUM: Batteries are going to change the economics of almost everything related to power. Make sure you understand some of the key battles because share prices are going to start reflecting the changes.