Cardboard
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Posts posted by Cardboard
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http://finance.yahoo.com/news/clinton-says-justice-dept-probe-201705005.html
It would be nice if the law also applied to the Clintons.
Cardboard
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U.S. oil inventories were up 3.4 million barrels vs expectations of 3.7 million. Last night API reported a build of 4.1 million.
The positive aspect of the EIA report this time around is the overall decrease in petroleum inventories which has not happened in a very long time or down 3.7 million barrels: Gasoline down 1.1 million, Distillates down 3.0 million, Other oils down 2.5 million. Last week it was propane that had not declined in ages being down. This week it was exactly flat.
So products consumption has been pretty solid while the crude oil inventory build is diminishing from previous weeks (was 7 to 10 million barrels/week for a few) with refineries coming back on line with the end of their maintenance season.
Now, if we could get accurate data from these people on production that would be great. Lower 48 States production was up 1,000 barrels/day last week. What a joke! Likely a typo since last week it was exactly flat from week to week. At least play with the numbers! Make it look like you are trying to estimate the real number vs posting the same number week after week...
http://ir.eia.gov/wpsr/overview.pdf
Finally of note, Line 9B reversal between Sarnia and Montreal should startup fairly soon with 240,000 barrels per day. It would have started in July but, the NEB requested hydrostatic testing. This should seriously improve shipment of crude oil out of the middle of the continent improving pricing for Canadian oil and reduce buildup at Cushing in Oklahoma.
Cardboard
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What I am getting at is that this market is insanely manipulated. As StevieV pointed out, the amount planned to be released over 7 or 8 years is immaterial and this is only starting in over 2 years.
The end result of this never ending media and political negativity for oil will be a world that will be severely undersupplied in a few years time. This will not help but, hurt the U.S. and its allies. Price spikes are never good for consumers. Instead of having a decent oil price that would still allow world production to decline to meet demand (say $60), we are having this crazy downswing that will create dislocations in the future.
If you don`t think that a never ending negative drumbeat hurts prices despite not being firmly grounded with fundamentals, ask a Valeant shareholder...
I will tell you who benefit from this: Goldman Sachs and greedy bankers. They benefit by shorting oil futures. And they benefit by locking in hedges at low prices for worried oil producers. They will also benefit from M&A and restructuring that will take place.
Cardboard
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Here is the latest to make oil plunge:
http://finance.yahoo.com/news/crude-oil-tumbling-132214670.html
The SPR selling part of its oil reserves starting in 2018!
While the Chinese are building up their own oil strategic reserve, the U.S. would be selling his in the face of mounting tensions with China (Spratly Islands, soon Taiwan) and Russia (bases being built in Arctic, submarines lurking around undersea cables, bombers regularly defying British airspace, Syria and on and on). Very smart! And while U.S. production is declining pretty fast with no sign of moving back upward.
Regarding Munger, it would be very good for me if the U.S. stopped all development of its own oil. However, I think it is not wise. Other countries have reserves for decades and there are mounting signs that oil won`t be needed for energy in about 50 years: fusion and solar. In terms of other usage such as plastics, fertilizer and other, I think that human ingenuity will find substitute in a 50 year timeframe.
The problem with U.S. oil development was this gold rush approach that we have seen. Although, this is being corrected fast and won`t come back any time soon. Sure, wells that have been drilled but, not fracked will be completed in the not too distant future. However, no company will be assuming $60 or even less $80 oil in their forecast which will make new project/spending budgets much smaller than they were even if oil was to rebound to the $60 level. Confidence is important in any market and this one is no different despite what the media keeps saying or that shale can come back in a hurry.
Cardboard
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Can`t believe the lies or incompetence from the EIA!
Their report claims that Lower 48 States production is once again exactly flat this week! This makes zero sense compared to their own statements about production having come down in September and recent statements from EOG. And how could something like that be exactly flat?
Moreover, propane/propylene inventories have not declined in ages. Yet, they are down this week for the first time in months. While I realize that delivery of propane to customers may have increased in preparation for the coming winter, the decrease seems pretty large considering that production from shale wells has overwhelmed demand for a very long time. IMO, it can only mean one thing: U.S. shale oil production along with condensates is indeed coming down.
For some reasons, they don`t want to admit that U.S. production has fallen below 9 million barrels per day. I suspect that we will have one more of these "one-time" large adjustment to weekly production as we have had in August.
Other than that, the report makes sense on the inventory side with gasoline and diesel/fuel inventories declining while crude inventories are going up along with refineries maintenance which will end shortly.
Finally, OPEC is meeting today with 8 non-OPEC producers in Vienna. Let`s see if they can put enough pressure on the Saudis to make them see the light. If not, then I think that Putin will become a little less gentle.
Cardboard
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"more of a "Cretien Liberal" vs "Pierre Trudeau Liberal" Government, but we'll see."
You bet! And with a finance minister like Paul Martin who reduced the capital gains inclusion rate to 50% from 75%. He has to be a hero for people on this board.
As an investor with a fair amount in oil & gas currently, I am quite worried when I hear things like we support the Keystone XL pipeline but, not Northern Gateway. Although, no stance on Energy East yet.
Not in my backyard attitude is not what we need IMO. I suspect that he will have a better relation being a Liberal with the guy in the U.S. who is hell bent on destroying the oil & gas industry and prefers Lac Megantic`s people blood on his hands than allowing safer pipeline transportation but, there will be no Keystone XL until Clinton or someone else takes over.
"Best looking first lady anywhere:"
Ever seen Bashar Al-Assad`s wife?
Cardboard
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Yup. Let`s starve American oil producers to death along with the jobs that come with it while we feed our worst enemies such as Iran. This will certainly reduce global fossil fuel production. What a clever strategy!
Cardboard
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26 oil focused rigs removed in the U.S. this past week according to Baker Hughes:
http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother
Cardboard
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The amount of sheer stupidity that I read in some of the bearish articles related to oil are amazing.
“You’re losing a barrel today to get two or three barrels tomorrow,”
A non-careful reader thinks that somehow this choking technique is doubling or tripling the amount of oil that a well will produce over its life!
"Choke management is among a number of strategies -- including moving to richer parts of fields, completing wells with more sand and water, and refracking -- that U.S. drillers have used to stave off a collapse in production. Output has fallen just 5 percent from its peak even though companies have shelved more than half their rigs amid a price slump."
Just 5%... In just 5 months... While Alaska has not declined and other conventional sources not much. That is almost a 10% decline for shale or a 20% annualized decline!!!
And how is choking new wells increasing immediate production and slowing that decline???
When you read about Citigroup analysts in an article beware. When is the next time that this bank goes bankrupt?
Here is a fact: a rig creates direct employment for 225 people. It means that since last year the U.S. has lost 250,000 jobs and I should add good paying jobs. On top of that, Caterpillar, GE, U.S. Steel and a myriad of others are no longer busy producing goods that will serve the oil and gas sector. Is that a surprise that U.S. employment is now looking weak?
Cardboard
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The situation for the Saudis is getting worse by the day.
And Putin is wasting no time after receiving authorization to use military force:
Cardboard
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Sounds like a crazy conspiration theory but, there seems to be some truth to it the way it is lining up.
Cardboard
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You can short HYG or buying puts on it.
However, we are already at the lows reached in 2011 on that index or when the World feared that Europe would disintegrate. Are we in such bad shape today?
Just food for thoughts. If energy was to rebound then a large portion of high yield bonds would turn out ok and that concern would likely disappear.
I was also reading late last night that consumer confidence in China is the highest in a year and that housing in major cities is doing well with prices up. When housing collapsed in the U.S. it was across the board and large cities and/or more desirable areas where the ones that recovered first. No doubt that there is a lot of real estate bad loans in the system in China but, is it as dire as some make it out to be?
Cardboard
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Likely neutral to positive as it consumers who end up with the extra U.S. dollars and are more likely to spend it on regular goods and paying off debt vs Bugatti's, other high goods and investments.
Cardboard
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Sculpin also mentioned this name to me and I think it is a phenomenal idea:
CCZ - Critical Control Energy Services
Near debt free software company involved in the Canadian and U.S. energy patch. A CRM player trading for 60% of book value and less than half sales with first mover advantage. The company has already restructured and is now entirely focused on this rapidly growing segment and has made a smart acquisition in Q2. Around 24% of shares are held by insiders.
This company saves money to energy companies which may explain why sales have kept growing during this downturn. They have some very well known clients such as CNRL as you can see on their website. The key for re-evaluation IMO is an increase in EBITDA margin and recurring revenues from the U.S. which the acquisition and recent re-alignement in executive compensation towards more profitability should help.
Here is a good analysis on the company, although about 6 months old. This poor company is not covered by analysts:
Cardboard
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You beat me to it! Congratulations Sculpin!
Cardboard
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Very strong demand growth and likely understated for 2016: up 1.7 million barrels/day in 2015 and 1.4 in 2016:
This report was largely ignored on Friday following Mr. Courvalin, from dear Goldman Sachs, with his sensational bear case call for $20 oil.
And to tell you the truth Meiroy, the IEA has almost always over-estimated production and under-estimated demand. Think about this. Since 2013 or when I unfortunately got more involved with oil stocks (it was very good for a while :'(), the estimated excess of production over demand has always been in the 1 million barrels a day range. And recently they have mentioned that we were running 3 million barrels a day surplus! That is like 1 billion barrels that should have been added to inventories since early 2013... Where are they?
Then they say this: "OECD oil inventories swelled by a further 18 mb in July to a record 2 923 mb."
Now, if I count right that is like 580,000 barrels a day that were added to inventory in July. We are a long way from 3 million barrels a day unless non-OECD countries are accumulating reserves like crazy and having farm tanks and tankers that according to knowledgeable sources do not exist.
By the way, 2,923 million barrels looks like an enormous pile but, this would be depleted in less than 60 days. It also represents even fewer days of consumption by refineries if you were to remove 695 million of this inventory or 23.8% stocked in the U.S. Strategic Petroleum Reserve that is not available unless an emergency order is declared by the President.
IMO, with tanks not at all full yet and with refineries having mostly paid for this storage capacity, it must be within their comfort level as to how much crude oil they require in inventory to run their business.
The IEA is also saying this: "...expected to cut non-OPEC supply in 2016 by nearly 0.5 million barrels per day (mb/d) – the biggest decline in more than two decades..."
FYI, the non-OPEC supply bucket is around 65 million barrels a day. And now we are supposed to believe that this will be cut by only 500,000 barrels a day in 2016 when every country is cutting capex by billions, offshore drilling is nearly at a halt and that U.S. production alone was cut by that amount in just the last 5 months!!!
Cardboard
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http://finance.yahoo.com/news/week-energy-does-mean-opec-182953325.html
I have found two interesting points in this article:
1- U.S. production is down 500,000 barrels per day since its peak in April. That is actually a bit more than that or around 550,000 if you are to normalize the wild swings in Alaskan production over the last 2 weeks.
That is a drop of 5.2% in just 5 months or 12.5% annualized. I think this is a very important data point being overlooked by market participants. Why?
a) IMO, it means that the rig count and capex decline still impacts oil production very much despite the media barrage about new found efficiencies.
b) It also means that the decline curves that we are familiar with for shale oil are real.
c) Considering that with no drilling, the natural decline rates for oil wells around the world is 5 to 7% annually, you can start to get an appreciation at what rate unconventional oil production has declined in the U.S. after peaking at just over 5 million barrels a day out of a total of 9.6. It has to be around 8% or 20% annualized.
If there is any truth and logic in what I have posted above, it is clear that the U.S. will soon produce less than 9 million barrels a day (within a few weeks) and that it will never produce at this level again unless it ramps up capex and number of wells drilled. Moreover, after all the high grading that has been done, newer wells should be drilled over time in less prolific areas and likely be more costly: less infrastructure in place.
2- The Chinese are putting in place their own oil benchmark and it will be traded in Yuan. I think this is a very big development. How long will it take for oil vendors to start accepting the currency from their largest client in the world once they have the same mechanism in place as found in the West? Over time, this should put pressure on the USD.
Cardboard
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Isn`t one of the purposes of this website to learn something on how to become a better investor?
Then if not, what are you doing here?
I picked 20% because I think it is hard to achieve in this environment. I wanted to see if there are over-achievers and how they have done it if they are grateful enough to share. 15% still work, you know. However, I think that we need a meaningful difference between individual and market returns to call it real useful Alpha.
Regarding the timing, does it really make a difference? Who said that results need to be measured after exactly 365 days or the time for the Earth to rotate around the Sun? What do you do for leap years?
I thought that there would be much more to learn from a few individuals who are over-performing in a tough year, than by people pounding their chests after doing 40% when the market is up 30% simply because they were overweight one or two stocks or industries that did better than the market.
Cardboard
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And by making, I mean at least a 20% gain in your portfolio.
And if so, what have you bought/shorted and what strategy have you employed?
NOTE: I have put 20% as an arbitrary threshold. IMO, with a market that has gone nowhere, it is a reasonable percentage gain to determine who has truly added alpha.
Cardboard
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"For unsuccessful (or "dry hole") results, the associated operating costs are immediately charged against revenues for that period."
The thing is that dry holes are disappearing, so this is becoming less of an issue. With 3D seismic and other advances, many if not most producing companies are now reporting 100% success rate with new drilled and completed wells. And a successful well is not only one that produces but, economical.
So dry wells now seem to only apply to exploration wells which makes it a much smaller portion of an E&P company as it used to.
Personally, I like to look at what they are spending in capex each year and how it impacts production volumes over time. Unfortunately, it becomes pretty hard with companies that are growing quickly and when you combine it with decline curves that are untested (with unconventional wells), it admittedly involves a lot of guessing.
Cardboard
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Look Meiroy, you don't have to listen to what I have to say since I did not predict the large oil price decline last year. However, this man did and this video adresses floating Iranian oil, which is mostly condensate, and he also talks about every source of supply and demand going forward. Worth watching in its entirety IMO.
http://www.bloomberg.com/news/videos/2015-07-20/isis-is-a-clear-and-distinct-danger-to-oil-ross
Andrew Hall is another one who was bearish, made a ton of money and who is now bullish. He also called it right in 2008. He is also calling the current IEA 3 million barrels a day surplus estimate bogus.
Cardboard
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Western media hates oil, it is so obvious. Just one more example:
The title:
"Russia will not cut oil production, Arkady Dvorkovich, Deputy Prime Minister of the Russian Federation, told CNBC Friday."
What was really said:
"For Russia, given the structure of production, it's very difficult to cut supply artificially," he said. "If oil prices will be low enough for a long period of time, supply will go down in (a) natural way, and I think this (is the) most efficient stabilizer for the market."
Will not cut and very difficult is not the same thing. Furthermore, when you listen to the man in the interview, they discuss about more discussions with OPEC and what steps they will take in the future. Also, if they stop investments in the sector as he is hinting, then it is a cut in production due to the decline rate.
I also think that Putin came back empty handed following this week's meeting with Xi. No new deal or investment announced. The Russians are now seeing that China will not help them out in the way they were hoping for. Being more insulated leaves them with little choice but, to find a way to make oil more valuable.
Cardboard
Oil, wow, WTF happened to all of the oil bugs on this site?
in General Discussion
Posted
http://finance.yahoo.com/news/p-just-downgraded-saudi-arabia-201114559.html
Downgraded and they have not borrowed much yet. Wonderful! Make them pay!
Cardboard