Category: Energy Sector

here

Interesting video.

source How Significant Is WTI’s Breakout?

here Suggests Oil might be trading in a new range. Mostly based on past data and technical analysis. Nothing original geopolitically, member of the causationsphere, thinking that trouble in the middle east affects oil, instead of oil effecting trouble in the middle east.

follow site The Real Worry for Oil Prices Isn’t Missiles Over Syria

Pure mindless speculation. Unoriginal in every sense. Has some decent data on Syria, Russia and Venezuela. Specifically production in Venezuela and Mexico has conveniently fallen precipitously. Production from Syria has been conveniently non-existent since 2011, most of Syria’s oil needs are being met by Iran. Russia is exporting 4.5 mbd, it has actually benefited from the tensions.

Oil, gold open lower despite Syria strikes; Russian retaliation in focus

click Really good article. Lots to chew on, with details on Asia (specifically Japan). I think they’re right that we are likely to see a lot of selling today. It’s monday after all.

Oil may be about to spike, and JPMorgan has trades to play it

Very good article, good details, and some interesting information about institutional positions on the Energy sector. While today and this week I think we’ll see heavy selling, I don’t think it will be enough to severely impact the gains in Oil. I agree there’s the possibility for a “golden age” of energy and energy related stocks for the next 6 months. With the Iran Sanctions issue coming up in may, there’s a nice sword of Damocles over the whole sector. Oil has been trading up long enough to have gotten people’s tastebuds wet for more oil action.

The main rumor that will be going around now is Iran and the Oil sector getting disrupted by Trump not extending the sanctions waiver. That could take Iranian oil off the market, which has already seen it’s recent oil glut conveniently dry up. With that rumor/idea circulating, and Trump’s proven ability to randomly tweet the most perfectly market quaking rhetoric, we’re in for a bumpy ride.

Oil Investors Rally Behind the Rally With Record Bets on Rise

Interesting to see shorts and longs in WTI dropping. It’s a small drop, but I think some people were shocked/unsure about oil. Long positions in %BRENT have increased

i-Ching casting for today:

16. Yü / Enthusiasm

above CHêN THE AROUSING, THUNDER
below K’UN THE RECEPTIVE, EARTH

The strong line in the fourth place, that of the leading official, meets with response and obedience from all the other lines, which are all weak. The attribute of the upper trigram, Chên, is movement; the attributes of K’un, the lower, are obedience and devotion. This begins a movement that meets with devotion and therefore inspires enthusiasm, carrying all with it. Of great importance, furthermore, is the law of movement along the line of least resistance, which in this hexagram is enunciated as the law for natural events and for human life.

THE JUDGMENT

ENTHUSIASM. It furthers one to install helpers
And to set armies marching.

The time of ENTHUSIASM derives from the fact that there is at hand an eminent man who is in sympathy with the spirit of the people and acts in accord with it. Hence he finds universal and willing obedience. To arouse enthusiasm it is necessary for a man to adjust himself and his ordinances to the character of those whom he has to lead. The inviolability of natural laws rests on this principle of movement along the line of least resistance. Theses laws are not forces external to things but represent the harmony of movement immanent in them. That is why the celestial bodies do not deviate from their orbits and why all events in nature occur with fixed regularity. It is the same with human society: only such laws are rooted in popular sentiment can be enforced, while laws violating this sentiment merely arouse resentment. Again, it is enthusiasm that enables us to install helpers for the completion of an undertaking without fear of secret opposition. It is enthusiasm too that can unify mass movements, as in war, so that they achieve victory.

THE IMAGE

Thunder comes resounding out of the earth:
The image of ENTHUSIASM.
Thus the ancient kings made music
In order to honor merit,
And offered it with splendor
To the Supreme Deity,
Inviting their ancestors to be present.

When, at the beginning of summer, thunder–electrical energy–comes rushing forth from the earth again, and the first thunderstorm refreshes nature, a prolonged state of tension is resolved. Joy and relief make themselves felt. So too, music has power to ease tension within the heart and to loosen the grip of obscure emotions. The enthusiasm of the heart expresses itself involuntarily in a burst of song, in dance and rhythmic movement of the body. From immemorial times the inspiring effect of the invisible sound that moves all hearts, and draws them together, has mystified mankind. Rulers have made use of this natural taste for music; they elevated and regulated it. Music was looked upon as something serious and holy, designed to purify the feelings of men. It fell to music to glorify the virtues of heroes and thus to construct a bridge to the world of the unseen. In the temple men drew near to God with music and pantomimes (out of this later the theater developed). Religious feeling for the Creator of the world was united with the most sacred of human feelings, that of reverence for the ancestors. The ancestors were invited to these divine services as guests of the Ruler of Heaven and as representatives of humanity in the higher regions. This uniting of the human past with the Divinity in solemn moments of religious inspiration established the bond between God and man. The ruler who revered the Divinity in revering his ancestors became thereby the Son of Heaven, in whom the heavenly and the earthly world met in mystical contact. These ideas are the final summation of Chinese culture. Confucius has said of the great sacrifice at which these rites were performed: “He who could wholly comprehend this sacrifice could rule the world as though it were spinning on his hand.”

THE LINES

see url Nine in the fourth place means:

The source of enthusiasm.
He achieves great things.
Doubt not.
You gather friends around you
As a hair clasp gathers the hair.

This describes a man who is able to awaken enthusiasm through his own sureness and freedom from hesitation. He attracts people because he has no doubts and is wholly sincere. Owing to his confidence in them he wins their enthusiastic co-operation and attains success. Just as a clasp draws the hair together and hold it, so he draws man together by the support he gives them.

follow url Six in the fifth place means:

Persistently ill, and still does not die.

Here enthusiasm is obstructed. A man is under constant pressure, which prevents him from breathing freely. However, this pressure has its advantage–it prevents him from consuming his powers in empty enthusiasm. Thus constant pressure can actually serve to keep one alive.

Six at the top means:
Deluded enthusiasm.
But if after completion one changes,
There is no blame.

It is a bad thing for a man to let himself be deluded by enthusiasm. But if this delusion has run its course, and he is still capable of changing, then he is freed of error. A sober awakening from false enthusiasm is quite possible and very favorable.

As I’ve written previously, one of the main drivers of the current Oil Rally(TM) is Saudi Arabia’s desire for an $80+ per barrel price ahead of their Aramco IPO. Isn’t it so convenient that the oil glut that was suppressing the price of oil has magically just disappeared? Isn’t it convenient that, in 2014 when the Middle East was in danger from ISIS the Oil Price WENT DOWN, but now everything has returned to business as usual in the causationshpere, so when the Middle East is in danger from Trump, the Oil Price GOES UP. That’s fundamentals for you.

Anyway, the latest news on the Aramco front, which looks to be a massively fixed race (which is probably why you should get in, if you can get in), is that “anonymous insiders” (dun dun duh!) have revealed the best news possible for the IPO, Aramco apparently makes more money than Apple $AAPL. That basically clues in the stock price for Aramco to be an early $174+ per share minimum.

While conveniently there was no actually pertinent info, like Saudi Reserve numbers (because those could negatively affect the market), “anonymous insiders” (dun dun duh!) were very chatty about cash flows ($52.1 Billion, $14.7 CAPEX, $13 Billion dividend – more than twice that of $XOM).

Another revelation, almost no debt. “anonymous insiders” (dun dun duh!) revealed that Aramco’s debt was something like $1.3 Billion, insignifcant when compared to $XOM which sports a whopping $37.9 Billion. According to some analysts (what-wha), Aramco spends about $4 per barrel extraced, as opposed to $XOM and $RDS-A which spend around $20.

Basically Aramco is run by magical Unicorns that shit lemon meringue and fart Patchouli and Sandalwood.

The take home is that the fix is in. The Saudi’s and OPEC want a slam dunk here, and they are doing everything in their power to make sure it happens. Barring an act of God (which is a possibility), Aramco’s IPO will be the biggest financial event of the century. A lot of people are gearing up to make a lot of money. Don’t be surprised if you see a “curse-your-sudden-but-inevitable-betrayal” when the Saudi’s end up selling a chunk to China, or Russia.

So a new post appeared on Breitbart today by Joel Pollak as an attempted response to Tucker Carlson questioning what are the benefits to America of an intervention in Syria.

Pollak has three points:

  • The United States cannot allow Syria to fall into Iranian hands. If it does, Iran will extend its military influence into the Mediterranean, threatening American bases as well as American allies. It will also strengthen its emerging position as a regional power that threatens Israel and the Sunni Arab states.
  • The U.S. has a strong interest in punishing the use of chemical weapons. Granted, that is an interest shared by the international community in general, but few nations other than the U.S. are capable of carrying out that punishment. If the U.S. fails to respond to the Syrian regime’s alleged use of chemical weapons, the use of such weapons will become more widespread, including by terrorists.
  • The U.S. has an interest in protecting the Kurdish population of the region, which provided the most effective ground forces in fighting the Islamic State (ISIS) in Syria, and which is broadly pro-American. If the U.S. were to abandon the Kurds now, many Kurds would be in danger, and few groups would take risks on America’s behalf in future.

The only significant strategic reason is point 1, which is technically true. As long as the US can maintain a clusterfuck in Syria, they disrupt the middle east and prevent them from uniting under the Iranian banner. This is a legitimate consideration, the question is whether this is even possible at this point. Iran has aligned with Russia and China, Iran is now their Proxy in the middle east, whereas the Saudis are ours.

Point 2 is just liberal gibberish. America is not the world police, and we shouldn’t be wasting money trying to pretend we are. Team America is a costly program, and it is underpinned by the leftist/democratic adoption of the Marxist idea of exporting the world revolution (export democracy). Yeah, problem is Democracy and a $1.45 will get you a Cafe Latte. Point 2 is also a slippery slope fallacy. Notice how it also assumes that one of its presuppositions is true (that Assad actually did it. The Jury is still out, we need hard evidence.)

Point 3 is semi-true. The problem is, America has been fucking over its allies in the middle east for, oh, over a century. Perfidious Albion ain’t got nothing on us. So while this is true, it’s a bit like putting extra makeup on a failed botox job. Not really going to help, and America will just end up with egg on it’s face.

The only benefit to this whole tit for tat is that %BRENT and %WTI are going to go up, which is a good thing if you’re an Energy Sector investor. The looming threat of Syrian intervention is really just more Kayfabe GeoDramatics. That doesn’t mean a war couldn’t be sparked off, it could, but that is unlikely to be the actual intention. Of course, the best laid plans of mice and men…

Kayfabe is in full effect this week when it comes to Syria and the alleged poison gas attack. Aside from the obviously hollywood-esque “kick the dog” move that gassing your own citizens would be, the major tip-off that Syria is just another opportunity to concentrate Middle-East tensions is both the Saudi and Russian hunger for higher oil prices. The U.S. needs them too, so Trump is ever-ready in his Andy Kaufman Heel routine to tweet out all kinds of market quaking rhetoric, and the Russians are ever ready to troll as they always troll.

Goldman Sachs, publicly speaking, is the Commanders Of The Obvious, piping up to say Oil would reach $72 a barrel on Thursday. This was well timed enough to make them look like geniuses (which admittedly they actually are), but the information was a bit late. It was already going up on Monday, with every indication that it would rally who knows how high.

The Guardian’s Jason Wilson penned a curious piece asking why the “alt-right” (whatever the hell that means anymore) is so anti-war while the “left” is so on board with intervention in Syria. The idea that someone so stupid is writing for the Guardian beggars belief. The left is motivated by secular morality, war is just for a just cause. The left will always be pro-war if they manage to talk themselves into righteous indignation over a “dictator” or “monster”, which is precisely what they allege Assad is.

This is all taking place while secondary actors, like the conveniently inept Houthi Rebels who keep firing pointlessly ineffective missiles at Saudi oil production properties. Oh, that’s not going to drive the price of oil up just like the Saudis revealed they wanted.

This rally in Oil is 100% driven by the geopolitics in question. For once though, the financial needs of multiple actors are being satisfied by a significant oil price rally. In fact, everyone is winning here. The US is winning, Saudi Arabia is winning, Russia is winning. All of OPEC is winning, on and btw, don’t forget PDVSA is having trouble, so it’s like double winning.

People always say the market is rigged. Yes, it is. That’s a good thing.

Right now $BP is up about 0.20, and $HP is up about 0.92. %BRENT is trading at $72 and %WTI is at $67, with which I am well pleased.

Before the open of trading, I’ve decided to collect up my thoughts on the sectors I’m investing in. Since I am currently heavily interested in the Energy/Oil sector, the topic today will be the Price of Oil and Oil related stocks.

The Summer of Driving

As you know, the summer time and vacations are upon us. People all over the US will be driving to Disney World, boating around the keys, and generally consuming more gas than normal. This is added on to the fact that jobless claims are lower than they’ve been in ages. People with jobs do something conspicuous at least 5 days per week: They drive to work. More people driving to work means more gas consumption.

The one thing that worries me is that Truck Driver’s as a demographic have shrunk a bit lately.

Nevertheless, it seems that with the summer months coming round the corner, a spike in Western consumption is likely.

My general strategy so far has been to invest in secondary industries. So if I think Oil will do very well, then I will always look for companies that support Oil extraction, transportation or sales. That doesn’t mean I won’t head into a direct producer/explorer, just that I tend to look at companies who’s future is looking up BECAUSE of a positive move in a sector. I guess you could call this “Directional Trading.”

My main stocks of interest are $BP, $HP, $PBT.

Helmerich & Payne, Inc $HP

I like $HP because it is a solid and essential business. I like “needful things” companies, that is companies that supply essential materials and equipment to support a sector. $HP has been a solid company for decades, it shows dividend growth, which tends to attract the ever increasing numbers of retirees. Remember, more and more people are retiring each year, and while there is a demographic collapse in the west, there is also a retirement crisis. Retirees today are hungry for income producing investments, making them an almost captive market of equity consumers.

It helps that $HP has a solid business, good leadership, and a steady increase in earnings (2016 1.62 Billion, 2017 1.80 Billion), and as Oil Prices rise, $HP’s earnings climb, because they produce Rigs and provide service and upgrades to existing rigs. This makes their business model particularly profitable within the oil industry.

$HP has another amazing quality that is essential for investment: Volatility. During heavy trading it is not unusual for $HP to range $1-$2 dollars in price, that’s an amazing opportunity to make (or lose) money.

BP Plc: British Petroleum $BP

British Petroleum has had a bad run of thing, between the crash in oil prices and the Deep Horizon’s oil spill, they’ve had a particularly bad image. Since I’m a fan of Behavioral Economics, I know that public opinion can drive a stock price more than fundamentals. But the bad is mostly behind them, and the “catastrophic” world ending oil spill, which didn’t really end the world, is now a distant memory.

As the price of Oil picks up, $BP has just entered a partnership with PetroBras $PBR for oil exploration. That means “emerging markets.” Emerging markets are a buzzword these days in investing, and if you have “emerging markets” your value goes up. A lot of the “emerging markets” buzz is actually legit. So there’s nothing like buzz with a basic fundamental core to it.

On the topic of $PBR, Goldman has apparently upgraded them from Sell to Neutral. $PBR is a stock I’ve been looking at since late 2017, though I haven’t decided yet whether or not I want in on that stock. I don’t know enough about the Brasilian industry or situation. One thing I really like about South America is there is tons of potential and tons of instability. Trouble creates opportunity. The one thing I dislike about South America is the general public outlook of social entitlement and Marxist revolutionary nonsense.

Regardless of the latest news for $PBR, it was trading 0.21 down yesterday from it’s daily range. That indicates to me a lot of people were taking profit from the meteoric rise starting April 10th where it opened in the 13.50s.

Permian Basin Royalty Trust $PBT

I was invested in $PBT for awhile last year, I like the stability of the stock, it pays good monthly dividends. Right now it’s trading up from the 10th but has mostly flat lined. There’s a bit of worry that with the rise in the price of oil the Permina Basin is getting crowded (which is good for $HP by the way), however there’s a slight bottleneck in the Permian, and it has to do with transit capacity of the pipeline. Remember, Oil production doesn’t always equal oil distribution, and a spike in Oil production might negatively impact the price of oil, but positively impact the price of pipe and the stock price of any transit companies who need to step up and service new production demands.

Another problem with the rise of prices are things like sand shortages (yes, that is actually a current problem in the Permian Basin). Permian Express 3, a new pipeline that aims to be up by the end of 2018 is intended to address this capacity problem. If the price of oil spikes anymore, this makes the Permian Future look a little brighter.

Right now, people’s forecasts for “adequate” or “growing” supply to meet demands might not be taking into consideration things like the Permian Bottleneck (infrastructure).

This is the same kind of problem that Canada has been facing, as April 9th saw Kinder Morgan throwing in the towel on the Trans Mountain Expansion pipeline (this is added onto the Keystone XL decade of debacles). Alberta has oil, it just can’t move the oil to market. While this is crushing to the local economy in Alberta, it’s good news for the Oil Price, less oil means more cost.

Saudi Arabia, ARAMCO and $80 Oil Price

Now that ISIS is no longer a significant actor in the middle east, and therefore suppressing the price of oil is no longer necessary, the Saudi’s (probably in conjunction with the Russians) want to bring oil back up to pre-2014 crash levels, that means around $80-$82 per barrel. If you remember, right around the crash, Russia indicated that its national budget was predicated on a $82 per barrel lowest price for Oil. Big moves from ISIS in Syria shot that plan to shit, but I doubt Russia can survive much longer unless oil prices get a bit higher.

Saudi has repeated, and conspicuously, said it is targeting an $80 Oil Price for 2018-2019, with a suggestion that ARAMCO is ready to IPO, but that they are waiting for a higher oil price. The sounds to me like a suspicious pump-and-dump for the IPO. If you can get in, get in early. Saudi Arabia, which is so cripplingly socialist is boggles my mind, is probably rather desperate for funds. It might not look like it, but nobody likes Saudi Arabia, and countries like Russia and China are heavily investing in Iran. So while the US is pretending like more sanctions, or withdrawing from the JPOA are going to “do something” about Iran, the rest of the world is picking it’s ME champion, and it looks like the Saudi’s days are numbered.

They realize they have a war coming, of one variety or another, and they need to fund it. How better than with the price of oil. Unfortunately, their best bet is also their enemies best bet. Far from being afraid of US shale production, Saudi Arabia is counting on it. All they have to do is entangle Iran’s Oil export industry in red-tape and gotchas (like they did with Libya) and then have easy to buy Saudi and Western produced oil and she-bam: the best laid plans and all.