Sure, folks are nervous. I’m not sure sub-$70 is a realistic price on days when markets are liquid, but it is what it is. I’m sure the service guys are getting nervous, but the high net back producers won’t be sweating about their sustainability today. WCS is just a touch below $60 right now, or off about 10% y/y. Not exactly the end of the world. If you’re a commodity producer that can’t sustain a 10% dip, you probably need to be cleaned out. I view this as a better buying opportunity than before, but I’m not going to lie and say I’m not nervous about it. But you don’t make the big bucks buying safe T-bills do you?
whose head is most likely on the chopping block here? pengrowth, penn west and COS are large caps that look vulnerable. Lightstream is looking like its days are numbered here. i’d imagine we’ll see Connacher and STP finally die here as well.
Baytex looking like it’s getting priced for a dividend cut
putin pissed
Last week I dug into the financials of some of these leveraged MLP oil producers. I don’t follow the energy sector so go ahead and correct my mistakes… Okay so what happened here? Some idiots discovered some new *high-cost* oil production technology and went crazy over-producing. Uhh like they never expected the price to drop with the over-supply they created? What were they thinking? Did Goldman Sachs author these financial structures by any chance? The finance people must have known that at a certain price threshold they would default, but they never expected prices to drop? Reminds me of my days working in sub-prime. So now there is this expectation that the Middle East adjust their production to save the Americans from their lack of foresight? Why would they do that? The situation corrects itself during 2015 if they just sit and wait for the idiots to blow themselves up. So they sit and wait… It looks like these chumps are oil-price hedged for the rest of 2014, and some of 2015. But as their hedges expire things get nasty quick. The weaklings default, it’s like oil sub-prime. The whole “American oil revolution” ends just like that, and prices go back up. Except no we can’t let markets run their course, the government steps in and does QE4 by mid 2015. And US oil becomes some sort of government-supported/owned deal.
Grabbed an OFS co this morning, hopefully I grabbed the right end of this falling knife…
wow this really is a great thanksgiving. lots of discounts. arab vs us. lets bring the ruckus.
Black friday sale!
*hopefully I don’t get trampled on this deal
OFS right now? Ballsy move.
I’m not sure this is entirely true; Saudi trying to flush out North American production. I think a big part of the drop in oil is fighting within OPEC. Some OPEC members may want to cut production, but know other members will *say* they’ll cut to keep prices high but when the rubber hits the road, they’ll produce at full capacity in an effort to gain market share. It’s a prisoner’s dilemma situtation. We’ve all seen these “break-evens” for OPEC members’ fiscal budgets…if you can’t get the price you need, try to make up for it in volume.
I don’t know if any of the Canadians on this board follow the potash industry (Saskatchewan is a major producer and has their own oligopoly), but they were hammered last year when the Russia/Belarus oligopoly/cartel had a dispute over market share and prices tumbled 25%. I think there may be some similar disputes within OPEC right now. Potash is far more concentrated in terms of suppliers than OPEC but when these cartels are fighting over market share it’s bearish for pricing.
Interestingly, other commodities are getting hammered today, too. Copper is down 3.5% so there may be a demand impact on today/yesterday’s pricing, not purely supply. (maybe commodity funds are getting flushed out of their positions?)
I do think OPEC would like to see North American production decline but they have to know its inevitable…for them to have prices where they’d like ($85ish and above) they’ll have to deal with it. I think there is more at play here than Saudi vs. US/Canada and it’s disagreements within OPEC.
I’m long DNOW, and may add more. I think struggling energy sector helps them as they seem to be planning a rollup.
Anyone have any good articles on the substitution impact on nat gas from this new level of oil? I’m long more nat gas focused plays and curious.
Snuck a fat short on the S&P500 Friday during pre-market, everyone was too preoccupied with their turkey food-coma to sense what was up…
Stock futures all down – oil price fears, plus “black Friday” shopping numbers suck. Hoping for a mass chaos (or even minor chaos) this week so I can buy up some goodies cheap.
@ Geo : what do you think would be a good canadian oil play given the beat down ?
Could you recommend 2-3 stocks, of the less speculative variety, read not the ones that need a barrel @ 100 to break-even ?
I don’t publicly talk about specific names, and in any event, I need to run some numbers at these levels which I haven’t had the chance to do with real work demands. That said, this is a must read: http://mobile.bloomberg.com/news/2014-11-30/oil-at-40-possible-as-market-transforms-caracas-to-iran.html I really don’t know where this will shake out at this point. We are beyond what I had envisioned for this decline now. Uncharted territory. That said, my inner value investor voice is telling me “be greedy when others are fearful.” Just wish I had the hours right now to put into some solid analysis.
Does anyone know of any sources on researching oil demand elasticity? If I remember right, it’s relatively inelastic but if levels hit 40 or so, a good bit less than half of where it was not too long ago, won’t we see a nice rise in demand at some point? And if so, how long will it take to see the effect?
Really ? Are you soooo conflicted that you can’t mention a couple of known players on an anonymous forum ?
Why so serious ?
Txs for link in any case, will have a look at that.
yo geo, I’m in the same position as you, no time. Maybe we should consider some type of O&G related index. Alerian MLP index has dropped off some. Wish I would have kept some of the marketing materials they were pitching me at this CAIA event I went to. They were showing huge gains year after year and we all know what follows that. Tossed all their docs last week while cleaning up. The lack of K1’s and the way the other points they talked about seemed interesting.
i would expect CPG, BTE, TET, LEG, PWT to rebound the hardest if we get a general bounce in the energy sector or see oil prices rise, for the simple reason that they are beat down the hardest.
Wasn’t too long ago when oil previously traded at these levels. A lot of names are trading much lower now than when oil was similarly priced. Will the stocks rally before crude…