Why is it, most of these conversations turn academic in nature? Very few actionable ideas are presented in a section that should be centered on making money. From my reading EOG was recommended, SM was my recommendation, any other ideas to profit? Anyone buying puts? I have xmas expenses and a week vacation to pay off haha, help me out.
Yes, this is the typical American way of thinking, that their way is superior.
Cooperation is better in some situations; obviously oil price volatility is not a good thing, as we have seen. My shallow understanding is that OPEC works together to solve this problem. It’s the silly yankees who have thrown the system out of whack, and blown themselves up…which makes them begging OPEC to cut production so absurd.
Good point, of course. I tend to think the best moves are made prior to the dummies figuring out what’s happening. Thus I’m not even looking at energy anymore, I’m looking at what comes next while they are looking at energy.
A few weeks ago I looked at some of the shale player’s financials and thought about shorting energy ETFs, shorting Russia, buying some 15% yielding energy bonds at the bottom, basic stuff. But I passed on it as my energy sector knowledge is too weak.
Right now I’m long China and Japan, they seem to be two who will benefit from the low prices, and have other favorable things going in their markets. Perhaps by Q2 we see a bump in profits?
I enjoy what others write, academic or not. But if you’re looking for ideas…
If you want a sneaky play on oil that not many people pay much attention to, look at Kirby Corporation (NYSE: KEX). It’s mostly a marine transportation company. Much of what they transport is petrochemicals, oil, refined petroleum products. The U.S. has an anticompetitive legislation called the Jones Act that means they basically have no real competition on the U.S. rivers in which their barges operate. They control the Mississippi, Ohio and other rivers and the Gulf Coast region. The are on the east coast, too. Their stock has been hammered the last few months b/c of their exposure to the oil and gas industry.
The CEO is actually a CFA Charterholder. Well run company that has been an opportunistic acquirer of assets in the past, and will be in the future now that valuations are coming down. It’s a good company. I recommend reading their transcripts – they know the industry well and manage capital quite well. Do you own due diligence of course, but good company with oil and gas exposure that’s a lot cheaper today than it was three months ago.
why does everyone think that we think we are superior? is it cuz of our gdp.
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Yes, this is the typical American way of thinking, that their way is superior.
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many of us don’t recommend stuff here b/c of conflicts of interest. i don’t really want to talk about too many individual securities b/c picking securities is part of my job. i’ll mention a few names here and there but i’ll never say to buy them nor will i make a big case for them. and i may not even own them when i mention them. i can only assume many others on the forum are in a similar situation.
Excellent…thanks for the tip
Simply don’t follow what you are talking about. 90+ percent of Americans are very supportive of the crash in oil. Absolutely love it. Volatility has been around since markets, private property, and a means for exchange. Forwards and futures were invented to manage that risk. There will be no product rotting on the dock because prices are allowed to adjust.
So where does America fall in the ranking of the greatest nations of all time? Right between Peru and Iceland?
The point was simple; some of us seriously don’t understand why Americans think it is OPEC’s job to lower production so that the US producers can remain profitable enough to stay in business.
Oh, who is promoting that idea? Some specific oil executive? Certainly not a common idea among American politicians or the average joe. How did you all come to think Americans feel opec should prop up prices. Just not the case on main street or wall street. Or maybe, i’m the one in a bubble.
^ I think you’re in the bubble. The whole media spin is that this price situation is caused by OPEC refusing to reduce supply.
Is the media spin suggesting opec “should” have cut production to support North American shale? I haven’t heard that. I agree. Would be a ridiculous expectation. Americans as a whole certainly have not historically been a fan of opec’s production controls.
Yea, OPEC is just going to let us cut production ha ha
Good read:
The Oil Price Shock: Primary, Secondary and Collateral Effects
http://aswathdamodaran.blogspot.com/2014/12/the-oil-price-shock-primary-secondary.html?m=1
I think the bottom is probably pretty near, but how long we stay there is the question. The whole reason they can afford to weather the storm is their sovereign wealth fund (SWF) and reserves. As vast as it is, the question is really how far the SWF can take them. On a per capita basis, the SWF in Saudi Arabia is really not that big when you compare it to 1.) Other gulf states, 2.) The size of the expenditures the government is making to maintain peace and stability (and by extension, power) in the country.
In order, SWF & reserves/capita (in USD) and daily production (000 bbl/d) by gulf state:
- Kuwait - $170K/capita (2,800 bbl/d)
-UAE - $110K/capita (2,800 bbl/d)
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Qatar - $70K/capita (650 bbl/d)
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Saudi - $20k/capita (9,650 bbl/d)
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Libya - $17K/capita (580 bbl/d)
Other OPEC countries don’t have SWFs/reserves worth considering (even combined).
If you view the Saudis as the dominant player in the game, then it’s them who will have to cut first *if anyone in that region cuts*. 65% of the Saudi population is uner the age of 30 and youth unemployment is rife there. The government must keep spending and drawing down on the funds to maintain peace/power/stability post Arab Spring (nevermind financing allies in the region). In short, the government needs $100 oil to stay in control over the medium/long-term. At $75, the funds run dry by 2018 so permanently pricing out shale is not an option. The other gulf states can’t even collectively make a meaninful/prolonged grab at market share after that either.
Back to buying opportunities, light oil producers with low total leverage can probably outweather the Saudis and might present a good buying opportunity. I’m not familiar with the U.S. space (much more comfortable in the Cdn space), so I can’t really give you any USD names…
Some oil/gas debt for MLPs is trading at pretty high yields, considering that they can suspend their distributions before defaulting. I’ve seen some talk about this on SeekingAlpha
^ in light of most Canadian oil companies forecasting production increases in 2015, my view has shifted to, “how can OPEC nations, particularly not Saudi Arabia, reduce spending?” only logical answer? produce more! greater production results in lower unemployment and a higher tax base which leads to lower transfer payments and a reduced deficit. the analysis of OPEC breakeven points disregards any change in strategy. by my calculations, all OPEC members, except Venezuela can easily increase production profitably at $50USD/bbl. the Saudi’s may hold back initially but if enough OPEC countries cheat and oil prices remain lower for longer, there will be pressure in Saudi Arabia to increase production to reduce and ultimately meet its budgetary needs.
the only saving grace for oil prices that i see, is that Venezuela may completely implode and production there could go from 3M/bbls/day to 0 in a relatively short period of time if war erupted. in which case, even Saudi Arabia’s excess capacity couldn’t fill that gap. outside of a Venezuelan civil war, which there doesn’t seem to be much chance of happeneing soon, i don’t think oil will see a major boost.
looking at past epidoses of supply shock instigated declines in oil prices during economic expansions (1985, 1998), the odds of a rapid and sustainable rise in oil prices is less than likely. look for oil to be markedly higher in 5 years, not 2, and likely the result of some geopolitical issue (e.g. Iraqi war, Venezuelan war) not because oil demand skyrockets or oil supply contracts rapidly.
I see some junior oil junk debt at $0.30 on the dollar, two year maturity. Seriously considering this. Yield is obviously through the roof. 50% debt/equity.
Correct. And it’s really very absurd, only Americans could think in this warped manner.
What was enjoyable was OPEC’s response; that the irresponsible non-OPEC producers should cut production (after all, they caused the over-supply), I high-fived them from afar…
Saudis to Non-OPEC Producers: Cut Your Own Output, We’re Good
further to my comments about not hoping for a quick rebound in prices, it is also fair to remember that should the Iranian situation simmer down, they’ll be adding over 2M/bbls/day. considering North American production will be rising in 2015, OPEC production will likely rise in 2015 and the Iranians will likely have to produce the extra 2-2.5M/bbls/day just to survive, even with a meaningful increase in demand, which is looking ever less likely with China slowing and huge efficiency gains in the West, we could be looking at a surplus of more than 2-3 M/bbls/day come mid-2015. this doesn’t even include OPEC’s excess capacity of ~3M/bbls/day, some of which will also likely hit the market.
without the collapse of a major supplier, i find it hard to be bullish on oil looking 0-3 years out.