Viewing articles tagged ‘Oil’

Forget about Supply and Demand – a New “Oil Equilibrium” is Now Setting Prices

by Dr. Kent Moors | published May 3rd, 2016

As I indicated last week, oil prices are levelling off. The combination of inevitable profit-taking and indications that some OPEC members were once again ramping up production brought the week’s spike to a halt, with both main oil benchmark rates (WTI, set in New York, and Dated Brent, set in London) down slightly.

Nonetheless, both are up well over 20% for the month. WTI closed yesterday at $44.78 while Brent was at $45.81 (at 2:30 p.m. U.S. Eastern time, the close of oil trading in New York) – already above my call for a WTI pricing floor of $42-$45 a barrel by mid-June.

And while we’re now looking at a rather narrow price range in advance of the next meeting of global producers (to be held in early June in Moscow), a much bigger change is already rocking oil markets – whether a production freeze is agreed to next month or not.

You see, there’s a new “oil equilibrium” forming… and money is already moving in.

Now, I’m not talking about supply and demand here. In fact, that has little relevance today.

Instead, I’m talking about a completely new kind of energy investment – one that will change the industry as you know it…

Saudi Arabia Ruined the Oil Summit – but Failed to Bring Down Oil

by Dr. Kent Moors | published April 19th, 2016

The failure of the world’s main oil exporters to reach an agreement to freeze production on Sunday in Doha resulted in a dive in oil prices…

For a few hours.

West Texas Intermediate (WTI, the benchmark used in New York) closed down 1.4% yesterday, while Dated Brent (the globally used equivalent set in London) gave up less than 0.8%.

And as of 11:00 a.m. Eastern today, WTI is up 3.5% (to over $41 a barrel) and Brent has gained over 3% (to more than $44).

If ever there was a “non-event,” the supposed “fallout” from this past weekend’s meetings certainly appears to be one of them.

In fact, this is what you’d expect from a successful Doha meeting, not from a failure.

Even so, some pundits are now saying that Saudi Arabia, Iran, and others will be increasing production after Doha.

They won’t – and the market knows this, as oil prices are rising, not falling.

Here’s why…

The Truth About Iran’s Impact on Oil Prices

by Dr. Kent Moors | published March 17th, 2015

It’s getting to be crunch time in the negotiations between the West and Iran over Tehran’s nuclear program.

Despite an ill-advised attempt by U.S. Senators to scuttle the talks, it’s clear the negotiations in Geneva will continue.

Now, TV pundits have taken to the airwaves suggesting that an agreement would flood the market with Iranian oil.

Combined with production surpluses in the U.S. and elsewhere, the “instant” prognosticators are pushing their Armageddon pricing scenario again, putting additional pressure on oil prices.

Meanwhile, those playing the new “Iranian card” are shorting oil even further.

It’s just the latest example of a self-fulfilling prophecy.

It works like this…

Chicken Little of “The Sky is Falling Brokerage” hits the airwaves warning of a collapse in prices, only to earn huge off-camera profits based on what he just said.

Meanwhile, average investors are left holding the bag as share prices fall.

There’s only one problem with all of this instant “analysis” and it’s a big one…

This Tiny Aussie Oil Stock Could Be a Big Winner in China’s Latest Trade Deal

by Dr. Kent Moors | published November 18th, 2014

The U.S.-Chinese accord on climate control may have grabbed the most headlines yesterday, but the trade pact signed between China and Australia is likely to have a much bigger impact.

In the shadows of the G20 meeting in Brisbane, Canberra inked a free trade agreement with Beijing that will see tariffs on all resources and energy products removed within two years.

By agreeing to the deal, Australia will now reap the benefits of zero tariffs on major exports like iron ore, gold, crude oil, and liquefied natural gas (LNG).

But that’s not the only upside “Down Under.”

This landmark agreement could also have a big impact on a tiny Australian oil stock…

The Good Dr. Birol is Stealing My Thunder (Again)

by Dr. Kent Moors | published January 30th, 2014

Something happened this morning that reminded me of a few events from the recent past. So today seems a like good time to tell you a story.

It’s about Dr. Fatih Birol. I have known him for decades.

As Chief Economist of the International Energy Agency (IEA) in Paris, his views have had some impact in the shaping of worldwide attitudes on energy.

He is also hardly reticent in letting you know exactly what those views are, whether they reflect prevailing opinion or not – sometimes stealing your thunder in the process.

Several years ago, I learned that first hand…

This is a Clear Path to Profits (Even in Volatile Markets)

by Dr. Kent Moors | published January 28th, 2014

It was quickly becoming OPEC’s worst nightmare. By the mid-1980s, oil prices had begun to collapse.

What’s more, renegade cartel members were selling more oil than their monthly quotas allowed, which merely made a bad situation even worse.

Ordinarily, that’s was a point when the Saudis usually would step in and cut their own exports.

But by then, the pricing situation had become untenable. Instead, the Saudis embarked on a bold new strategy.

First, they opened up their own spigots and flooded the market with crude. This taught those recalcitrant OPEC members a big lesson about lost revenues.

Second, they also introduced a “netback” pricing strategy that proved to be far more important – both for them and today’s energy investors.

This new strategy considered the entire pricing sequence, using refinery margins (the difference in cost between processing and prices on the wholesale level) as a measure of prices upstream and downstream.

Now, twenty-eight years later, the same netback strategy has made a comeback that has handed us a clear path to profits – even during periods of high volatility.

Here’s how this strategy works…

The Best “Yardstick” for Picking Oil and Gas Stocks

by Dr. Kent Moors | published January 21st, 2014

As every savvy investor knows, multiples are one of the best yardsticks when it comes to finding undervalued stocks.

More often than not, that involves a hard look at the multiple of a company’s earnings to determine whether or not a stock is fairly valued.

Two Ways to Cash in on Energy Security

by Dr. Kent Moors | published January 16th, 2014

Today, I want to talk about to you about a new investment opportunity.

It’s in energy security, and I have two money-making ways for you to play this trend.

It stems from the accelerating need to protect the production, transport, and distribution of our newfound wealth in oil and gas.

This point was hammered home yesterday with the release of Oil Security 2025: U.S. National Security Policy in an Era of Domestic Oil Abundance.

The 108-page report is the inaugural effort of the Commission on Energy and Geopolitics. Admiral Dennis Blair, former Director of National Intelligence and Commander in Chief, U.S. Pacific Command; and General Michael W. Hagee, 33rd Commandant of the U.S. Marine Corps, served as co-chairs.

Not surprisingly, the report reflects matters I have discussed before.

They include: the rise of security issues surrounding new domestic oil finds, increasing geopolitical tensions and the changes in the energy balance, both from a supply and a demand perspective.

In this case, the transition of supply from conventional to unconventional sources, combined with a new emphasis on domestic U.S. production, certainly has both global and security considerations.

But it’s the changes on the demand side that are even more striking…

Part Two: How to Profit as the Energy Balance Shifts

by Dr. Kent Moors | published January 9th, 2014

On Tuesday, I told you how “energy rebalancing” is going to hand us some profitable new opportunities this year.

In Part One, I introduced you to three different dimensions of this unstoppable trend, but I focused only on the big changes happening in the energy network.

Several of the examples I used were global in nature and provide a great segue into the final two dimensions of energy rebalancing: The changing geographic considerations and financial arrangements.

Of course, “geographic considerations” refers to location.

And the three I mentioned on Tuesday – the Russian ESPO pipeline, European imports of liquefied natural gas (LNG), and China’s rapidly expanding presence in the South American energy picture – are perfect examples of the evolving geographic picture.

Yet, the geographic also introduces two other main elements.

That includes a dramatic shift in the balancing point in global energy markets, which means that where the demand is will drive the energy markets.

In this case, demand has moved significantly from North America and Western Europe to the developing world in general… and Asia in particular.

This trend will become even more pronounced in 2014…

What 18 Oil Executives Just Told Me in Las Vegas

by Dr. Kent Moors | published November 19th, 2013

As you read this, Marina and I are once again on a flight home from Las Vegas.

It was our sixth trip to “The Strip” since May. It seems everybody wants to meet there these days. It is also the first stage in what is going to be a very hectic travel schedule.

We arrive back in Pittsburgh late tonight. Then I fly solo to Baltimore tomorrow to work on very significant new product launch at Money Map Press (you’re going to hear a great deal about this one soon…so stay tuned.)

Afterwards, there won’t be much time to wind down. The two of us are off to Rio de Janeiro on Thursday, back on Thanksgiving and then on to Moscow the next day.

Of course, I will be bringing you along on all of these trips – including my December adventures which I’ll be discussing in due course.

For now, let’s just say it’s shaping up to be a blur of airports over the next two months.

As I noted about a month ago, there are some big things happening in the global energy mix right now and they are going to provide us with some great investment opportunities.

But first, I need to talk to some very important but scattered people.

That brings me to the 18 oil executives I just met with in Vegas…

The Misunderstood Link Between Oil, Natural Gas and Inflation

by Dr. Kent Moors | published June 27th, 2013

According to conventional wisdom, there can’t be a significant rise in inflation without a corresponding, and usually preceding, jump in energy prices.

In fact, the correlation between energy prices and inflation has become almost a mantra among some market pundits.

Unfortunately, the reality is somewhat different than what’s portrayed by talking heads in thirty- second sound bites.

As with most complicated problems, the answer just isn’t that simple.  

While the energy sector stretches from hydrocarbons, through alternatives, to the renewed interest in solar, wind, geothermal and biofuels, it is the dominant force in the sector that tends to drive the markets.

That means crude oil and natural gas.

Oil, Natural Gas and Inflation

At first, the inflation argument seems plausible enough.

There would appear to be little opportunity for an across-the-board stimulation of the inflation fires without there also being a corresponding surge in energy prices. Energy is the single most pervasive underpinning of economic activity.

In fact, post-facto analysis of the 2008 run up in both natural gas and oil prices does provide some credence to the idea that rising energy costs did serve as a precursor to inflation.

However, there is a caveat. It’s one frequently confronted in all types of analysis…

Two Oil & Gas Game Changers… This Morning

by Dr. Kent Moors | published January 23rd, 2012

Two major events rocked the oil and gas sector this morning.

But they weren’t tied to ubiquitous market volatility or natural disasters.

These were intentional – each a result of human decisions.

Whatever the cause, the result is that we are we are off to the races… and you and I have the opportunity to benefit nicely.

The Embargo Has Begun

First, the European Union (EU) in Brussels passed its anticipated oil embargo against Iran.

The EU also froze assets of the Iranian central bank in Europe. I have recently commented on what this action would mean to the oil markets, even if Tehran does not make good on its threat to close the strategic Strait of Hormuz.

Closing the strait, even for a short time, would lead to the quickest rise in oil prices on record.

But the likelihood of that taking place is uncertain. Iran, after all, gains 80% of its income from oil exports. They would experience a steep financial cut by their own hand.

More certain now are the major crude oil pricing issues that would result from withholding Iranian crude from the European market.

And that one will be happening.