Posts Tagged ‘oil stocks’
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
Financial metrics are improving significantly for oil stocks, and the commodity’s prices are a combination of speculative fervor mixed with geopolitical events. At $110.00 a barrel for West Texas Intermediate (WTI) crude, drill bit profitability has improved significantly.
I’ve always been an advocate of having one large, integrated oil and gas company (or limited partnership) in a long-term equity market portfolio. There are good dividends to be had and solid prospects for long-term capital appreciation.
But the marketplace is dealing with declining production among the biggest companies, and this is why smaller, domestic producers are now doing much better on the stock market. As is always the case, oil production growth must be combined with spot price growth. When the two are moving commensurately, there’s good money to be made.
As I’ve mentioned a number of times in this column, Kodiak Oil & Gas Corp. (KOG) is a popular Bakken oil play that’s highly liquid and is an institutional favorite. This company boasts excellent potential going forward. However, Kodiak is a stock with a lot of high expectations priced into its share price. (See “My Two Favorite Picks in the Speculative Oil & Gas Sector.”)
One company that I think speculative resource investors should now be putting on their radar is Northern Oil and Gas, Inc. (NOG), which is another junior oil and natural gas producer that operates in Montana and North Dakota.
Northern has been going down steadily on the stock market, as the company has had difficulty growing its production due to infrastructure issues. Specifically, company management cited adverse weather and extended road restrictions as hampering … Read More
I accept that, but what I don’t understand is the surging increase in oil prices. Oil is now more than $106.00 a barrel.
I realize we have the uncertainties in Egypt after the ousting of the country’s former leader Mohammed Morsi by the army. Of course, while Egypt is not a major oil producer, the Suez Canal does run through it. And a huge amount of Middle Eastern oil is carried through the canal to the Mediterranean Sea from the Red Sea.
At the current price for oil, the technical picture continues to point to gains in the near term. But I would look at an upside move in oil prices as an opportunity to sell if you currently have oil exposure. Oil is not in a sustainable upward move or bull market.
But the commodity is still advised for traders. I would expect a return to normalcy in the near future, with oil prices retrenching back to less than $100.00 a barrel.
The chart of the West Texas Intermediate crude (WTIC) oil prices below shows the overextension from the previous sideways channel, with $98.00 on the top end. I doubt the breakout will hold as the underlying fundamentals are not supporting a situation of a demand-supply imbalance.
Chart courtesy of www.StockCharts.com
The U.S. economic recovery is ongoing, but it’s also showing signs of stalling. U.S. companies are struggling to grow revenues and … Read More
The spot price of oil is worth keeping a sharp eye on. With West Texas Intermediate (WTI) oil having jumped past $105.00 a barrel, oil stocks are moving again.
Geopolitical tensions certainly have added a bit of a premium to oil prices, but there’s been resilience in spot well over the last couple of months, and it’s based on the prospects of a stronger U.S. economy.
And that strength in oil prices, while never helpful for consumers, is happening in the face of the highest amount of U.S. crude oil production in 20 years.
The primary consequence of stronger oil prices for the consumer is obviously the bill at the pump. But it’s also in the infrastructure that is struggling to keep up with the production boom. U.S. oil production has overtaken pipeline capacity and railroads are making up for the transportation gap.
In the first half of 2013, 356,000 carloads of crude oil and refined petroleum products were moved by rail, according to the Association of American Railroads (AAR). This equates to 1.37 million barrels of oil being shipped every day, according to the U.S. Energy Information Administration (EIA).
There is now a 60,000-car order backlog for oil railcars in the U.S. market.
Based on the latest 2013 monthly output numbers, the EIA says the U.S. is producing 7.2 million barrels of crude oil per day. The majority of the increase in rail transportation of the commodity is due to the huge growth in Bakken oil production, mostly in North Dakota—which doesn’t have enough pipeline capacity. (I’ll be travelling to the Bakken oil region shortly for a first-hand account … Read More
There are a lot of reasons why the spot price of oil is back over $100.00 a barrel, and the fact that it is up there is very good for oil stocks.
The price of natural gas continues to be subdued, but that doesn’t mean that oil and gas companies that are growing production are not able to do well on the stock market.
Resource equity investing always has the added risk of the value of the underlying commodity, but the Bakken oil boom, itself a counterplay on oil prices, is creating a number of winners.
We looked at Kodiak Oil & Gas Corp. (KOG) before. This is one of the many highly liquid oil stocks that have become a big favorite of institutional investors.
Kodiak has oil and natural gas reserves concentrated in the Williston Basin of North Dakota and Montana and the Green River Basin of Wyoming and Colorado.
Kodiak’s first quarter (ended March 31, 2013) saw oil and gas sales of $165.1 million. That compared to $79.9 million in the comparable quarter in 2012 and $130.8 million in the fourth quarter of 2012, representing increases of 107% and 26%, respectively.
The company sold 1.95 million barrels of oil equivalent (MMBOE) in the first quarter of 2013 for a gain of 103% comparatively, of which 94% was crude oil.
Earnings came in at $19.4 million, or $0.07 per diluted share, compared to $1.7 million, or $0.01 per diluted share, for the same period in 2012.
There are plenty of oil stocks in the equity universe that have done well and should continue to do so. But even the … Read More
Railroad stocks as a group have returned to their 52-week highs. I like Union Pacific Corporation (NYSE/UNP) and Canadian National Railway Company (NYSE/CNI). They are the strongest of the group and are trading right at their all-time record highs.
These two companies are worth accumulating when they’re down. According to history, they are typically not down for long. Wall Street keeps edging their earnings estimates higher for 2013 and 2014. Railroad stocks are pretty good with their guidance.
Bakken oil (and natural gas) is a huge opportunity for the U.S. economy. The production boom is happening now, with all its benefits, disadvantages, and costs. But a lot of junior oil stocks playing this patch aren’t moving upward in the stock market in the face of weak oil prices. The Bakken oil boom itself is a counter play on rising prices.
Phillips 66 (NYSE/PSX), a real winner since being spun off from ConocoPhillips (NYSE/COP), recently announced it will ship Bakken oil from North Dakota to New Jersey by rail. According to the Association of American Railroads, in 2008, U.S. Class I railroads originated 9,500 carloads of crude oil. In 2011, the number was 66,000 carloads. The final number for 2012 is expected to exceed 200,000 carloads, and railroads are also expected to deliver large amounts of frac sand to drill sites. This is a seriously good trend for railroad stocks. The stock chart for Phillips 66 is featured below:
Chart courtesy of www.StockCharts.com
Of course, the Bakken oil boom has its consequences, and we’re not even talking environmentally. Make no mistake: big oil is not interested in U.S. energy independence. Its … Read More
With remarkable consistency, oil stocks continue to do great on the stock market. Even though spot oil seems to be stuck below $100.00 a barrel, gasoline prices have been going up for the last month, as U.S. refiners use January and February for maintenance shutdowns.
Any way you cut it, oil remains a huge part of our daily lives, and most oil stocks are trading at or very near their all-time record highs. I should qualify that—what I mean is that most big oil stocks are trading right at their highs. Even with the U.S. oil production boom (which is very real), smaller oil stocks just don’t go up in value unless the spot price is doing so as well.
I always love consistency in a stock market investment. Consistent growth in earnings, dividends, and share price is absolutely golden, considering the volatility we get in capital markets. Save for pumping from your own oil well, you can only beat rising gasoline prices by owning a part of the company, and the biggest ones offer some of the best consistency the stock market has to offer.
Consider Chevron Corporation (NYSE/CVX), which is one of the large, integrated oil stocks that are trading at their all-time record highs on the stock market. But the stock isn’t expensive, with a current price-to-earnings (P/E) ratio of 8.7. The company has about $11.00 a share in cash and a price-to-sales ratio of around one. Its long-term stock chart is below:
Chart courtesy of www.StockCharts.com
Chevron is a member of the Dow Jones Industrials and has an outstanding track record of increasing its quarterly dividends … Read More
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