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Oil rises - 50% thing

krafty

Alfrescian (Inf)
Asset
Iran and Iraq were determined to boost production, and were unlikely to come together with Saudi Arabia to cut OPEC output. The Saudis have made no official statement on a deal.

"This is a rally on false hopes, unfortunately"

Other analysts said oil prices may have found a bottom and could rally as high as $45 by year-end as non-OPEC supply is reduced and global demand improves.

U.S. oil production fell in November for the second straight month, the Energy Information Administration said.

U.S. shale producers, who have helped add to the glut, have slashed 2016 capital spending plans more than expected, with one saying prices would need to rise more than 20 percent to turn a profit.

Meanwhile the U.S. oil drilling rig count fell for the sixth straight week with more cuts seen, oil services company Baker Hughes Inc said.

"With more energy companies announcing cuts and OPEC contemplating a cut, it looks like oil is forming a bottom," said Phil Flynn, an analyst at Price Futures Group in Chicago.

"Now the question becomes how high can they go. The charts look like a test near $40 is on the cards."

http://www.cnbc.com/2016/01/28/us-crude-extends-rise-on-hopes-of-supply-cuts-to-tackle-glut.html
 

syed putra

Alfrescian
Loyal
Before oil price exuberance, the norm was only mid 30's and it have been like that for decades.other commodities also the same. Prices spiked they say due to china demand, but more likely, due to funds buying and pushing commodity prices up using QE money.
 

Asterix

Alfrescian (Inf)
Asset
For an investor who wants or needs an energy component in the portfolio, investment-grade corporate bonds of the larger exploration companies offer a less risky way to participate in the sector, at least until the smoke clears. The bonds are trading at a significant discount, some at 70 to 80 cents on the dollar. "They are trading like high-yield debt," says Peter Andersen, a portfolio manager at Congress Asset Management.

...........

He owns COP's A-rated 2.4% bond due Dec 2022, which trades at 89 cents on the dollar, down from 96 cents just a few months ago, and yields 4.3%. The stock dividend is 8%.

Other energy issues of potential interest include the BBB-rated MRO 2.8% bond due 2022, which trades around 67 cents on the dollar, yielding about 9.4%. This compares to a stock dividend of 2.2%.

.................

Like stocks, bonds have risks, and investment grade isn't an absolute guarantee. Interest payment coverage ratios are dropping. For example, at MOP the ratio of annual EBITA to annual interest charge dropped from 24X in Sep 2014 to 9X one year later.

If a ratings firm, like S&P or Moody's, should downgrade a company's bonds, selling pressure could ensue. Moody's is considering a downgrade of the MOP bond noted above.

Many oil exploration bonds and stocks made 52 week lows last week. For individual investors, buying a bond isn't as easy as trading stocks online, but it can be done through a broker. Should crude rise unexpectedly, the stocks will rise faster than the bonds, but they will both rise. But if oil stays where it is or goes down more, bonds will let you sleep a little better.

[Cut and paste from somewhere, not out of charity, but so I have a place to store and easily retrieve it]
 
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Asterix

Alfrescian (Inf)
Asset
"The market can stay irrational longer than you can stay solvent." - John Maynard Keynes

If $145 oil creates enough new supply to drive prices below $30, then $30 oil is likely to strangle production enough to drive the price back up.

But it will take time for the market to shake out its weakest players. It will take time for Wall Street to realise that there's no more easy money in the oil patch. It will take time for lenders to force bankruptcies and fire sales. It will take time for speculators to see that they have been speculating.

Oil prices fluctuate because of something that economic professors teach freshmen every year - apprently with few successes. Oil is so important to the world economy that demand is inelastic: The use of oil for energy, especially as a transportation fuel, is so pervasive that most users can't readily change their patterns of consumption. When oil prices go up, an airline has to keep flying regardless. When oil prices go down, the airline doesn't expand right away - it just makes more profit to offset the previous losses.

Supply of oil is also inelastic: The only thing to do with a completed oil well is to produce oil. We often read that some of the wells brought on line during the last episode of peak prices are not breaking even. But that sad state of affairs (for some) doesn't quickly affect supply. In the short run, it is better for a driller to gain $25 a barrel of revenue from a well with a break-even point of $50 than it is to have no revenue from that well available to service the debt that financed the drilling when the business looked like a sure thing.

Modern financial engineering, with its bewildering array of options, futures, and derivativees, also helps keep supply and demand inelastic. Large producers and consumers can hedge their necessities, leaving banks and traders to reap the outsize profits and suffer the outsize losses that come with taking large risks.

The market outlook for any inelastic commodity is always the same: a sudden snap-back comes when we least expect it.

[Disclaimer: Ever mindful of the Feringi rule of acquisition that says "no kind act shall go unpunished", the above is cut and paste from somewhere, not out of charity, but so I have a place to store and easily retrieve it]
 

blueRad

Alfrescian
Loyal
I really like low oil prices not just because it helps everyday consumers but also to see oil rich ROP countries suffer. Maybe they can feed their citizens through the power of Islam.
 

Asterix

Alfrescian (Inf)
Asset
Surely, the below cut-and-paste is too simplistic.

What causes AMGN's trajectory to be different from SNY's? That is the $64,000 question!

http://bigcharts.marketwatch.com/qu...p?symb=sny&insttype=&freq=2&show=True&time=12

http://bigcharts.marketwatch.com/qu...?symb=amgn&insttype=&freq=2&show=True&time=12


As with other pharma companies, Sanofi's fortunes aren't closely tied to the broader economy. Health-care spending remains a priority for governments and individuals, and is generally one of the last costs to be sacrificed when money gets tight. "The problem with investing according to economic cycles is that they're hard to predict. Pharma companies have long product cycles, but you can follow them more easily," Davis says.

It takes several years to develop new drugs and have them authorised. Once on the market, they have patent protection for 20 years. That means companies and investors can pinpoint crunch points for earnings.

[Disclaimer: Ever mindful of the Feringi rule of acquisition that says "no kind act shall go unpunished", the above is cut and paste from somewhere, not out of charity, but so I have a place to store and easily retrieve it]
 

frenchbriefs

Alfrescian (Inf)
Asset
cheap oil is only a temporary thing,enjoy while u can....every year we use more and more electricity,every year we build more and more automobiles....at least 80 million cars are added every year,crude oil consumption has been increasing exponentially every year just like COE prices,the world population increase exponentially over the past few decades,does anyone seriously expect oil prices to be like those during the 1970s and 80s?cheap oil is only a temporary phenomenon,we have already exceeded our oil production capacity years ago,decades ago when oil was cheap in america and america was producing enough oil to be self sufficient for consumption,america was only consuming a few million barrels a day,now america is consuming nearly 20 million barrels a day and half of their oil is imported and they are going to war for more oil.....the root of all evil is not the countries who produce oil but those countries that crave oil like the chinese craved opium.america alone consumes twice as much crude oil as china even though their population is only 350 million compared to china's 1.3 billion.u may think fracking is the solution but it only delays the inevitable that peak oil has already occured and its all downhill from here,and its expensive as fuck.any excess production they are trying to squeeze out cannot be sustained.
 

krafty

Alfrescian (Inf)
Asset
history lesson:

the international oil prices kept rising and losses expanded. On October 26, 2004, because of the awful pressure from Merm (Mutsui Energy Risk Management) CAOHC ordered CAO to begin closing its options positions when the oil market price was US$55.65, the highest price of the year. At the end of November, the international oil prices fell to $46.00/barrel and the average oil price was US$43/barrel for the month of December 2004.

The average price of CAO’s total options position was US$48/barrel. CAO should have the opportunity to gain by hedging when the market price fell below US$48/barrel. Unfortunately by that time all the options were already closed due to the pressures from the counterparties of CAO and the decision to cut loss made by CAOHC, the parent company of CAO.

One of the major reasons for CAO’s loss was due to a shortage in capital, which CAOHC once firmly promised to support CAO but some management changed the decision at the last minute.

https://en.wikipedia.org/wiki/Chen_Jiulin
 

frenchbriefs

Alfrescian (Inf)
Asset
Before oil price exuberance, the norm was only mid 30's and it have been like that for decades.other commodities also the same. Prices spiked they say due to china demand, but more likely, due to funds buying and pushing commodity prices up using QE money.

if oil prices can be pushed up by speculation,are u saying the whole world are idiots overpaying $140 a barrel for nothing?that everyone on this goddam planet was paying $4 a gallon since 2000 at the petrol pump because a couple of idiots decided that oil prices should be above $100?u mean oil is not determined by supply and demand but by artificial speculation?in that case sign me up!!!!i wanna invest in oil too!!!!
 

Asterix

Alfrescian (Inf)
Asset
According to a regulatory filing on Friday, Buffett’s Berkshire Hathaway Inc. BRK.A, +0.21% bought 2.54 million shares of Phillips 66 PSX, -0.84% shares last week, spending about $198 million. Regulatory filings show Berkshire busied up its January buying shares of one of the world’s biggest independent refiners.

Berkshire announced in August that its ownership of Phillips 66 stock was up to 10%. As noted by ValueWalk, the purchases of the stock in January bring the Berkshire stake up to 13.6% of shares outstanding around $5.8 billion. The total purchase was just over $800 million in the month — $625 million in early January and $200 million late in the month, noted ValueWalk.

http://www.marketwatch.com/story/wa...er-2016-01-31?siteid=bigcharts&dist=bigcharts
 

Agoraphobic

Alfrescian
Loyal
The time is here for mankind and technology to move away from reliance on fossil fuels. In view of population and growth and increase in energy consumption, our energy has to come from sources other than oil. Pollution is another thing to force us to use less oil (and its by products). Although economics is the deciding factor, I wish to see our species becoming more responsible in energy usage and its choices. Nigeria, and Iraq, both oil producing countries have already seeked loans from the World Bank, this is a sign that things may be changing for oil-rich countries. Time for them to stop relying on this God-given commodity for their wealth.

Cheers!

cheap oil is only a temporary thing,enjoy while u can....every year we use more and more electricity,every year we build more and more automobiles....at least 80 million cars are added every year,crude oil consumption has been increasing exponentially every year just like COE prices,the world population increase exponentially over the past few decades,does anyone seriously expect oil prices to be like those during the 1970s and 80s?cheap oil is only a temporary phenomenon,we have already exceeded our oil production capacity years ago,decades ago when oil was cheap in america and america was producing enough oil to be self sufficient for consumption,america was only consuming a few million barrels a day,now america is consuming nearly 20 million barrels a day and half of their oil is imported and they are going to war for more oil.....the root of all evil is not the countries who produce oil but those countries that crave oil like the chinese craved opium.america alone consumes twice as much crude oil as china even though their population is only 350 million compared to china's 1.3 billion.u may think fracking is the solution but it only delays the inevitable that peak oil has already occured and its all downhill from here,and its expensive as fuck.any excess production they are trying to squeeze out cannot be sustained.
 
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