Displaying items by tag: oil

(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)

Oil prices are at a fresh peak seemingly every day. Some who have been watching the space for years might be wondering if that will prove fleeting or if it is the start of a big bull market run. Goldman sees oil as staying between $75-80 per barrel over the next 18 months, which will help companies deleverage and improve their returns. OPEC seems likely to be supportive of current prices. Given all this, Goldman thinks oil stocks are a good idea, recommending Occidental, Exxon-Mobil, Devon, Hess, and Schlumberger, among others.

FINSUM: If you believe in the economic recovery then commodities seem likely to have a strong run, oil included.

(New York)

Stock and commodity prices have been all over the place of late…see the full story on our partner Magnifi’s site

(Houston)

The commodities boom has been going on since at least late last year, but the big question is where the booms in many underlying raw materials can last. At least as it concerns major commodities like oil, minerals, and lumber, the answer is a big yes. The reason why is that the current boom has to do with underinvestment in production over the last 18 months, a problem that is hard to solve quickly. This means demand will outstrip supply for the foreseeable future in many areas. Lumber is a good example, where underinvestment has led to soaring prices.

FINSUM: Capital has not been adequately invested to meet the demand of consumers and prices are showing it. Equilibrium will take some find to find. There is a nice runway for commodities.

(Houston)

Environmentally, Social and Corporate Governance (ESG) investing is getting all of the attention from both news outlets and traders, but some investors think too much attention is being diverted from fossil fuels. They argue that oil is now a sin stock, where many investors stay away because of the nature of the good (e.g. alcohol, defense, gambling, and tobacco). Sin stocks traditionally outpace the market, under the wisdom that they remain perpetual value stocks because socially conscious investors stay away, and oil ETFs are starting to outperform renewable ETFs. In reality, sin stocks don’t get their boost from value but rather higher operating margins, and oil is one of the most competitive with low to negative margins depending on how far upstream the extraction is. While oil is moving out of environmental favor it isn’t quite a sin stock yet because it also lacks the capital intensity that is common to sin stocks.

FINSUM: There are a lot of reasons to be bullish on oil right now, but being sin stock probably isn’t one. Oil can still be a value play even if that’s not how sin stocks make their name.