Posts Tagged ‘oil prices’
If business conditions are good for a public company, then it’s highly likely that its share price has already been doing well in this great monetary expansion.
With the stock market at a high, it’s tricky being a new buyer/speculator. As we’ve seen with biotechnology stocks, the price momentum can quite suddenly come to a halt.
One sector where there is more price momentum to be had is in oil. Not so much in the large, integrated oil companies but in domestic mid-tier producers as well as services. (See “My Top Energy Pick with Market-Defying Momentum.”)
In the large-cap space, Baker Hughes Incorporated (BHI) is now experiencing renewed momentum, both operationally and on the stock market. This oil and gas equipment and services company is seeing solid sales growth in North American operations as well as the Middle East.
In spite of unusually cold weather accounting for a drop in North America’s well count, the company was able to grow domestic first-quarter sales by 6.7% to $2.78 billion. Total sales for the first quarter grew 10% to $5.7 billion, while earnings grew 23% to $328 million.
Baker Hughes has been buying back a lot of its own shares (3.4 million in the first quarter), and the stock recently began a new uptrend. The company’s two-year stock chart is featured below:
Halliburton Co. (HAL) is also experiencing renewed operational and price momentum on the stock market.
The largest oil and gas services company by revenue is Schlumberger Limited (SLB). Its first-quarter sales grew to $11.2 billion, up from $10.6 billion comparatively.
Diluted earnings per … Read More
Oil prices could be setting up for an upside break if the situation in Crimea intensifies and a military conflict emerges between Russia and Ukraine over the rights to Crimea.
Since the price of West Texas Intermediate (WTI) crude broke out to over $100.00 a barrel in early 2011, oil prices have done very little, trading largely in a sideways channel with support in the $80.00 level and resistance around $110.00.
The global economic renewal has helped to support oil prices in spite of the continued stalling in China. Return to growth in the eurozone is also adding some support, but for oil prices to shoot higher, there really needs to be a geopolitical event, such as what we are seeing in Crimea. Of course, don’t forget the Middle East, which still has its major issues, especially with the speculation that Iran is building nuclear-enabled weaponry.
There’s also the crazy dictator of North Korea, Kim Jong-il, who has continued on the same path his father was on, isolating the country. His testing of several missiles earlier this week into South Korea was just another signal that he craves attention.
At the end of the day, to make money in oil will largely be dependent on the hot spots of the world.
While I doubt Russia will launch a military assault on Ukraine, you never know with President Putin. If this should happen, oil prices would vault higher to above $110.00 a barrel, and likely maybe even higher toward the $150.00 level, last reached in 2008 prior to the subprime crisis.
So while oil prices could ratchet … Read More
A good amount of speculative fervor has come out of this market so far this year, but there’s still quite a bit of valuation froth around.
Across the board, 3D-printer stocks have come back. 3D Systems Corporation (DDD) still boasts a trailing price-to-earnings (P/E) ratio of around 150.
Tesla Motors, Inc. (TSLA) is still going strong. It’s one of few super-hyped stocks that made a strong recovery in January after a material sell-off months before. (See “Buy High, Sell Higher: Top Investment Strategy for Buoyant Markets?”) The position just bounced off $265.00 per share. Next year, Wall Street estimates the company will do more than $5.0 billion in sales.
Looking at the stock market currently, there’s a lot of indecisiveness and geopolitical events are overshadowing the action.
Watch large-cap biotechnology stocks (or the NASDAQ Biotechnology Index) for their trading action specifically. This group of stocks reaccelerated strongly in February and is very much overdue for a material correction.
I’ve noticed several key momentum stocks within the group have started rolling over. This should be a strong contributing indicator to the short-term action unrelated to specific events happening in Ukraine.
Gold is holding up well with the geopolitical tensions, and oil prices are too, but to a lesser degree.
Stocks are due for a break. What looked like the makings of a material correction in January, equities reversed direction after the Federal Reserve, once again, reiterated its willingness to be highly accommodative to capital markets.
This kind of market (after such a strong 2013 for stocks) warrants a significant degree of caution. I wouldn’t be jumping onto any bandwagons. … Read More
Oil prices have rallied back to the $100.00-per-barrel level on some near-term supply and inventory concerns.
While the upside move is rewarding the buyers of oil stocks, I don’t think oil prices are set for an extended rally.
The chart of the West Texas Intermediate (WTI) crude oil shows oil prices bouncing higher after the formation of a bullish double bottom, based on my technical analysis. And while oil prices can head higher on the chart, I just don’t see any moves being sustainable.
The catalyst for higher oil prices has more to do with tight inventories driven by a rise in demand. The inventory of oil contracted by 1.5 million barrels per day in October to December 2013, according to the International Energy Agency (IEA). The IEA suggests the demand for oil will rise by 50,000 barrels per day to 1.3 million barrels in 2014. (Source: Johnson, C. and Sheppard, D., “Robust demand tightening oil market, IEA says,” Reuters, February 13, 2014.) If this estimate pans out, oil prices could edge higher and hold above $100.00, but I doubt the move will last that long.
Now, if China jumps out of its sluggish growth (read “Investment Opportunities in Depressed Chinese Stocks”) and Europe can drive its economic renewal, then we could see brighter prospects for oil prices.
On the supply side, America is relying less on the Organization of the Petroleum Exporting Countries (OPEC) and foreign oil as American oil companies continue to squeeze more oil out of the ground, specifically shale oil.
There may even be a time down the road when … Read More
The lull between earnings seasons will soon be here and with the absence of corporate results, trading action can get choppy.
It’s still important to follow transportation stocks and the NASDAQ Composite. Transportation stocks have a tendency to lead the broader market, and outperformance from the NASDAQ Composite (compared to the other major indices) signals speculative fervor remains.
The one commodity that’s very much back in play in terms of a reflection of investor sentiment is oil. West Texas Intermediate (WTI) has come back to the $100.00-per-barrel level on what looks like speculative betting on better economic growth this year.
There were actually quite a few disappointments in big oil’s recent financial results and production is definitely an issue. Both large-cap and small-cap oil stocks have not seen their share prices rise commensurately with oil prices, but some value is finally appearing in this sector.
One company that we looked at previously is Kodiak Oil & Gas Corp. (KOG). This is a Bakken oil play that, until recently, was expensively priced. (See “While Few See It, This Stock Sector Is Getting Risky.”)
Kodiak expects to produce 42,000–44,000 barrels of oil equivalent per day (boepd) this year, which represents about a 45% gain over last year. The company’s stock chart is featured below:
Kodiak reports its fourth-quarter and year-end financial results at the end of this month. Junior oil companies may see their fourth-quarter numbers affected by the severe cold in terms of the number of well completions.
While Kodiak may be considered a hold currently, this position is becoming more attractively valued. The … Read More
Hooray, gasoline prices at the pumps have declined to their lowest levels this year! Better yet, they’re looking to head even lower, as oil prices begin to unravel below $100.00 per barrel.
The level of oil reserves jumped by 5.2 million barrels for the week ended October 18, according to the Energy Information Administration (EIA). There are some 379.8 million barrels of oil in our reserves, and that doesn’t include those in the Strategic Petroleum Reserve.
With the rise in reserves and lower demand due to the recent government impasse, the country is importing only 7.7 million barrels per day versus the four-week average of 8.0 million, according to the EIA. (Source: “Summary of Weekly Petroleum Data for the Week Ending October 18,” Energy Information Administration web site, last accessed October 25, 2013.)
Today, the United States is less dependent on foreign oil than at any time in its recent history. The country is producing more domestic oil specifically from the shale oil in North Dakota and Montana. (Read “Why You Shouldn’t Be Worried About Surging Oil Prices.”).
The EIA says North America is now the biggest producer of usable shale oil in the world, and it’s only going to get bigger as new technologies surface that can extract even harder to get oil. In 2012, shale gas represented 39% of total natural gas production in 2012 in the United States, according to the EIA. Canada was second at 15%.
In my view, the rapid development of shale oil will continue to lessen the country’s dependence on OPEC oil, and this is good for both the economy and … Read More
The way things are going, the place to be in capital markets seems to be in energy. Oil and gas stocks, particularly smaller ones, continue to be solid earners in a stock market looking for direction.
While oil prices gyrate on geopolitical events, market speculators have been bidding the commodity based on the slightly positive tone in U.S. economic data. It doesn’t take a lot for market participants to bid oil. The only way to beat it as a consumer is to own a piece of the company.
While many junior oil and gas producers are moving higher in value on the stock market, valuations are particularly lofty. They were high to begin with, before recent events in Syria, but they have only gotten worse. Now isn’t particularly a good time to be considering new positions on the stock market, but the energy sector is a bright light in an otherwise lackluster environment.
Jim Rogers, the “Investment Biker,” wrote that he would continually analyze all capital markets, but trade very little. He would wait until an investment opportunity became so compelling, and then take on a considerable position (with leverage).
I don’t see this kind of opportunity with oil, but I do see it in natural gas as a longer-term, cyclical play after the natural gas build-out is completed.
One of the most successful natural gas producers on the stock market has been Cabot Oil & Gas Corporation (COG). Even with flat natural gas prices, this oil and gas producer is up four-fold since the beginning of 2010. Its valuation is super lofty, but then again, this enterprise is delivering … Read More
For those of you who think oil prices will continue to steadily rise, you may want to pause and rethink that. The reality is that the price of oil, which in our case means West Texas Intermediate (WTI) crude, recently broke difficult resistance at $110.00 a barrel. I wouldn’t be emptying my son’s piggy bank to buy oil.
Now, if the conflict in Syria worsens and a U.S.-led coalition goes in and bombs the heck out of the Syrian army, then obviously oil prices would drive higher. And to make matters worse, if Syria, which is said to be harnessing the world’s largest chemical weapons arsenal, decides to engage in chemical warfare as its best defense, then we would have a major problem and oil prices would surge.
In the worst case scenario, if U.S. ally Iran and its Supreme Leader Ayatollah Ali Khamenei decide to enter into the fray, then the risk of the war spreading through the tension-filled Middle East would intensify. For example, if Iran decided to join Syria and, in the process, launch an attack against its enemy Israel, then all I can say is hell would break out.
I hope the worst case scenario doesn’t happen, but if it does, look out, as oil prices will surge.
Yet based on oil futures, it seems like the stock market is betting on nothing major materializing in Syria and the Middle East.
The price chain of the WTI crude oil shows futures oil prices declining below $100.00, beginning with the May 2014 contract. Prior to that, the high point is $109.33 for the October contract. In fact, … Read More
Geopolitical events are overtaking the stock market’s near-term trading action, which was all about speculation over the Federal Reserve and what Chairman Ben Bernanke will do regarding quantitative easing.
Based on what transpires in Syria, the equity market is ripe for more declines; realistically, the stock market has been extremely lofty this year, considering the economic news and the prospects of reduced monetary stimulus.
Confirming the overly positive disposition of the stock market has been the performance of the NASDAQ Composite Index, which previously lagged behind the Dow Jones Industrial Average until it recently confirmed the market’s uptrend.
Over the last 12 months, the Russell 2000 index has been the strongest of the main stock market indices. This is a classic secular bull market indicator, but everything’s been turning downward this week.
Obviously, geopolitical events skew the certainty the capital markets crave. Second-quarter earnings season was underwhelming, with the exception of balance sheets, which continue to be top-notch for most Dow Jones components.
Looking at the equity market constructively, many of its leading blue chips were very strong until the beginning of August. Then speculation about the potential reduction in quantitative easing and monetary stimulus, in general, took the froth out of some of these leading positions, including Johnson & Johnson (JNJ) and PepsiCo, Inc. (PEP).
I repeat my view that there is very little action to take in this market, particularly as it pertains to long-term blue-chip investors. The stock market has come off a very large uptrend in a short period of time, and it’s been due for a full-blown, material correction for a number of months … Read More
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