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OIL PRICES: could stay down thru 2016-19


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Perhaps these two companies deserve closer study right now

 

HK-386 / China Petroleum & Chemical Corp ... update : 3yrs - HK$4.56

HK386_zpsw7dhoog0.gif

 

MUR / Murphy Oil ... update : 3yrs - $23.54, which is back to 2004 levels

MUR_zpsndbsuyff.gif

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MUR

Profiles : YHO : CNN :

 

(Here are some comments)

1/

Murphy Oil Corporation (NYSE:MUR) represents Pzena’s fifth-largest energy holding in terms of value. The fund disclosed holding 4.74 million shares of the company worth $114.67 million as of the end of September. Murphy’s stock has lost over 38% since the beginning of the year as lower oil prices affected the company’s top and bottom lines. For the third quarter, Murphy Oil Corporation (NYSE:MUR) posted revenue of around $715 million, representing a decline of around 50% on the year and it swung to a loss of $9.26 per share, versus a profit of $1.38 delivered in the third quarter of 2014. However, its adjusted net loss of $0.72 managed to beat the estimates of a loss of $0.91 projected by analysts. Among the funds we track, just 24 reported holding shares of Murphy Oil Corporation (NYSE:MUR) at the end of June, although they amassed around 13% of the company’s outstanding stock.

==

> http://www.insidermonkey.com/blog/the-top-five-energy-picks-of-a-multi-billion-dollar-fund-383155/

2/

After Bloomberg’s report that Apache (APA) had been approached about an $18 billion buyout by an unknown buyer, Cowen’s Charles Robertson suspects Hess (HES) and Murphy Oil (MUR) could be targets as well. He explains why:

... Apache, Hess, and Murphy Oil have strong balance sheets and have materially under performed in 2015 as investors have focused on E&Ps with longer life onshore portfolios. ...

==

> http://blogs.barrons.com/stockstowatchtoday/2015/11/09/after-apache-do-these-stocks-have-targets-on-their-back/?mod=yahoobarrons&ru=yahoo

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HK-386 / Sinopec

Profiles : YHO : CNN :

 

1/

Sinopec (SNP) Q3 Earnings Beat Estimates, Revenues Fall : Zacks(Fri, Oct 30)

China Petroleum and Chemical Corporation SNP, also known as Sinopec, reported third-quarter 2015 earnings per ADR of 20 cents, beating the Zacks Consensus Estimate of a penny. Revenues however fell 34.6% year over year to 496.48 billion yuan ($77.89 billion). The top line was affected by lower oil price realizations.

Sinopec Profit Falls 47.8% in First Nine Monthsat The Wall Street Journal(Thu, Oct 29)

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The case for $20 oil is getting stronger by the day

Published: Dec 8, 2015

 

Those looking for some December cheer may instead face a few more gloomy sessions, given oil’s seemingly endless drop.

Global stocks aren’t too happy about things this morning, and that includes U.S. stock futures as investors still come to grips with the notion that OPEC really is just going to stand by and watch crude prices keep tanking. There isn’t any big data to distract us today and the Fed meeting is still a week away, so there may be nothing to watch but oil.

 

The chatter this morning is about how hard it’s going to be for oil to recover from the latest fallout. Those looking for elements of support aren’t finding much, and that's laid out in our call of the day, which says prepare for $20 a barrel. This all follows oil’s plunge yesterday to a fresh 7-year low under $38.

 

Clearly, Wall Street is struggling right now to see silver linings in yet another crumble by crude, though gas prices are set to get real cheap. Still, investors should take comfort from the likelihood that this fresh tumble won’t weigh on overall earnings like last year, says Ed Yardeni of Yardeni Research. The earnings share of the S&P’s energy sector XLE, +1.42% is down from a high of 12.1% last year to just 4.2% at the end of November, he says in a note to clients.

 

Yardeni says his shop isn’t going to lower 2016 and 2017 earnings forecasts for this market, in the wake of this latest oil rout. “We did so at the end of 2014 and early 2015 because we expected lower oil prices and a stronger dollar to weigh on earnings,” he says. While that scenario may continue into early next year, the hit won’t be as bad as last year, he says.

Cold comfort for now maybe.

 

> http://www.marketwatch.com/story/brace-yourself-because-20-oil-could-be-next-for-this-market-2015-12-08?mod=MW_story_recommended_default&Link=obnetwork

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One way to hedge might be to buy calls on oil or oil service shares

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Bullish: Don't Get Used to Low Oil Prices, There's a Big Rally Coming

 

As often happens after large degree trends reach maturity, the crowd becomes fully associated with the what has happened, and misses the next great opportunity. This exact scenario is not only occurring in crude, again (as it did at the low of one lesser trend degree at the 2009 low, but also happened at the 2008 peak, 2011 peak, 2011 low, and 2013 peak), into the current price and time windows.

 

The rationale back then was the oil glut paradigm, where the world was drowning in crude. Interestingly, as the monthly bar chart below notates (into the 2008 parabolic price rise), this glut story came to the headlines within only six months of the story that was being attached to the crude price rise from $50 to $137; the peak oil paradigm. This was the premise that every last drop of oil on the planet has been identified, and the moment in time the world would run out of oil could be calculated (given the population growth and usage assumptions, etc.).

 

Click here to see the below chart in a new window

crude-monthly-at-major-low.jpg

Like any pendulum swing from one extreme to the other, wild price movements in the oil market are moving from one (sentiment) extreme to the opposite.

What really caused the run into the 2008 all-time high had nothing to do with counting oil droplets or barrels, nor did any other high or low since OPEC lost control of global oil pricing, arguably around the turn of the century. The cause of these moves are liquidity (of cash, not crude), leverage, and sentiment; mostly of hedge funds and professional trading firms that tend to become fully associated with their positions, known in the industry as "talking their book," at the time when objectivity is needed most.

When viewed from a pattern recognition perspective, which is one of the algorithms that our objective decision support engine (DSE) uses to identify high probability trend inflections and forecasts, the news noise quiets, and the picture becomes clear and usable. For example, if you use our super simple six-foot analysis technique, employed by moving your eyeballs six feet back from your screen, one notices that the 2008 peak can be labeled as wave 1-circled, representing the highest high in history. This is also when the crowd developed the most bullish sentiment extreme ever recorded, and created the most bullish story one could hope to apply to a commodity; crude supplies are now provable to be finite, and demand infinite!

 

As typically happens at this pole in the pendulum's swing (the moment in time when the direction is about to change, and the pendulum freezes in space), prices hit the upper 3 standard deviation band (containing 99.7% of normality), and have no where to go but down. Ralph Elliott proposed that parabolic rises always end in crashes return to, or below, the origin of the parabola's beginning. As the chart shows, it took less than four months from the peak for the price to reach the $50 origin, then two more months for the ultimate low to be put in. That is labeled as wave (A) of wave 2-circled; the first corrective wave of a three wave correction, to be eventually labeled as (A) down, ( B) up, and © down, concluding the entire corrective wave 2-circled, ending the crude market's reset of the bullish extremes that manifested the $137 peak.

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Insiders are buying - but this chart targets HK$1.75

 

HK:0933 / Brightoil Petroleum (Holdings) Ltd. (HKG) ... All-data : 3-yrs : 6-mos : 10-d
HK933-LT_zps9hqo0wn9.gif

12/14/2015 11:19 AM : 2.19 / Change:arrow_dn_sm.gif -0.10

Open: 2.29 / High: 2.29 / Low: 2.16

Volume: 783,731

Percent Change: -4.37%

Yield: 0.91%

P/E Ratio: 14.898

52 Week Range: 1.72 to 5.20

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I'm actually beginning to think of buying some BP shares.Am I mad?

 

Buy Calls maybe... Oil could fall further

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  • 2 weeks later...

Record Oil Output From Russia Despite Low Prices

picture-161.jpg

Here's one for the "this was not supposed to happen, and nobody saw it coming" book. Bloomberg reports on the Siberian Surprise: Russian Oil Patch Just Keeps Pumping. In the fight for market share among the world’s oil producers this year, Russia wasn’t supposed to be a contender.

 

Relatively high taxes on oil have actually sheltered the industry from much of the impact of the drop in prices. The government takes nearly on crude exports everything above $30-$40 a barrel, so companies don’t feel much impact until prices fall below that.

For the conspiracy-minded, if it takes $30 for Russia to feel pain over oil, we will soon see it.

 

Meanwhile, back in the US, oil production is strong despite total rig counts dropping from 1875 to 709 in the last year. That's a decline of 1166 rigs. In percentage terms it's a 62% drop.

Of the 709 total rigs, 541 are oil rigs. Gas rigs count 168. For the week, oil rigs rose by 17 while gas rigs fell by 7

 

Read: Russia Sees No Oil Price Recovery for 7 Years

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  • 2 weeks later...

Oil hasn't been this cheap in terms of Gold, since about 1972

 

1.png

 

^Recent Chart of the Gold/Oil Ratio

 

2.gif

 

^Long term chart of the Gold/Oil Ratio

 

The spikes indicate, we don't hang about the extremes for too long.

 

And remember what happened in the 1970s? Inflation!

 

3.png

 

Yes.

And it is good to be contemplate a switch into Oil, when it is cheap, as it is now.

 

How will you play it?

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Buy Calls maybe.

 

Normally, it is better to wait for a retest of the Lows

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I have taken a position in BP at around 328p. The mainstream media is screaming $10 oil and the oil gold ratio is at three standard deviations. I may be wrong but at least for the short term I would hope for a bounce in the oil price maybe from short covering that would make this a profitable trade. We'll see

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Sold out yesterday at 351p. Think BP will outperform the oil price going forward as oil spill costs are fully disclosed (but share price has not improved to reflect the full write down yet), it has strong refining part to its business which is less suspectible to the oil price and will be well placed to pick over the wreckage of the oil companies and pick up some bargains in due course. I expect it to cut its dividend to around 4%.

 

Separately I read that extending 5th waves tend to correct back to the wave 2 level. If this is the case for oil we could be heading back to $22 per barrel albeit with some strong but short short covering rallies to come.

 

The long term support for BP is at around 3.23p we may touch this level at a lower oil price. If this is the case the risk reward of buying will improve. Going to focus on this much more and will post how it goes going forward.

 

Lev

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Big News : Russian Oil to be traded in Rubles

 

NEWS AND VIEWS FROM THE NEFARIUM JAN 14 2016

 

Russia is now the largest producer of Oil.

Why shouldn't it have a leading role in pricing it?

 

- Rather than an oil importing nation like the US

 

We won't see the full dramatic impact of this until oil is scarce and the dollar is weak.

People could be scrambling to get hold of Rubles to buy oil, making Russia stronger

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Just as $100+ oil led to massive overinvestment and an oil glut, so $30 is leading to underinvestment and a future shortage.

 

http://oilprice.com/Energy/Crude-Oil/27-Billion-Barrels-Worth-Of-Oil-Projects-Now-Cancelled.html

 

"The world is oversupplied right now, by some 1 mb/d. But the industry is shelving nearly 3 mb/d in future output because of conditions today."

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Buffett is doubling down on Oil:

http://oilprice.com/Energy/Oil-Prices/Does-Buffett-See-A-Bottom-In-Oil-Prices.html

 

meanwhile the oil:gold ratio is now stretch to historic extremes:

 

http://www.macrotrends.net/1380/gold-to-oil-ratio-historical-chart

 

that's interesting

there are so many ways to do the oil trade

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Brent crude touching $28 today - new low yet BP so far holding above long trend line (323p) at around 333p. I think BP will bounce hard if a floor can be found in the oil price. Chat rooms are full of small investors shorting the oil price - near term bottom coming in oil maybe?

 

Epicentre of this crises seems to be moving from oil to Hong Kong over the past few days. I don't profess to understand all the issues involved but it seems to be about the yuan overvaluation. Russell Napier is well worth a read on this.

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So if you are looking for classic contrarian signs of a bottom by the popular press here's Leo's attempt:

 

http://www.marketwatch.com/story/leonardo-dicaprio-blasts-the-oil-industrys-corporate-greed-2016-01-20

 

 

Reminds me of one supermodel saying she "didn't get out of bed for dollars right at the bottom of the last USD bear market."

edit: quick search, here it is:

 

http://www.dailymail.co.uk/tvshowbiz/article-491838/Supermodel-Gisele-Bundchen-I-wont-bed-US-dollars.html

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