Oil Prices

Perhaps its time to start looking into OnG again.

sent from my Galaxy Tab S

(30-08-2015, 08:20 AM)BlueKelah Wrote: Perhaps its time to start looking into OnG again.

sent from my Galaxy Tab S

I just started accumulating Chesapeake energy equity
Also sold call options on my exiting small stake to reduce cost of capital
And have some in the money put options to hedge further drop in share price but we should be near the bottom
It may persist near the bottom for a prolonged period though

(29-08-2015, 10:45 AM)Bibi Wrote: Warren Buffett’s Berkshire Hathaway Inc. disclosed a $4.5 billion stake in Phillips 66, the Houston-based oil refiner, as the billionaire investor’s company increases its bet on the energy industry....

“Berkshire’s made a clear statement about how they view the oil business,” said Cliff Gallant, an analyst at Nomura Holdings Inc. “They seem to be taking the long view that demand for fuel is going to come back.”..

Berkshire Reports $4.5 Billion Stake in Refiner Phillips 66

Buffet is investing in the downstream business because the increase in capacity in the past decade has mostly been upstream, depressed crude oil prices = lower cost of feedstock = higher profits.

But most refiners have not really been beaten down, so valuations haven't really gone down by much...

(30-08-2015, 08:20 AM)BlueKelah Wrote: Perhaps its time to start looking into OnG again.

sent from my Galaxy Tab S

why make yr life so difficult when u can trade oil futures with ease and liquidity...

even a 20% rebound in oil price will not have a uniform impact on mining service companies and that of what is term as O&G play listed on SGX...

be patient and wait till we clear out on the skeletons

(31-08-2015, 07:48 AM)lilvestor Wrote: Buffet is investing in the downstream business because the increase in capacity in the past decade has mostly been upstream, depressed crude oil prices = lower cost of feedstock = higher profits.

But most refiners have not really been beaten down, so valuations haven't really gone down by much...

Yeah. Refiners are a spread play rather than a pure play on oil...And the crack spread should be at historical highs....

(30-08-2015, 06:42 PM)GFG Wrote:

(30-08-2015, 08:20 AM)BlueKelah Wrote: Perhaps its time to start looking into OnG again.

sent from my Galaxy Tab S

I just started accumulating Chesapeake energy equity
Also sold call options on my exiting small stake to reduce cost of capital
And have some in the money put options to hedge further drop in share price but we should be near the bottom
It may persist near the bottom for a prolonged period though

You are 1 brave soul. I cannot, for the life of me, think of a reason to invest in Chesapeake at the moment, except for short term trading objectives.

The start of production decline?

Whatever happened to the much vaunted productivity increases?

Soon we will see, not only two oil prices, the WTI and Brent, but one more "NIE"? the oil prices no longer only in US$, but RMB...

China oil market reform paves way for new crude benchmark
02 Sep 2015 12:57
[SINGAPORE] China may launch a global crude oil futures contract as early as October to compete with the existing London Brent and the US WTI benchmarks, three sources said, as it pushes ahead with reforms to open up its oil markets.

The long-awaited crude contract would better reflect China's growing importance in setting crude prices, as well as boost the use of the yuan in which it will be traded, although volatile global trading conditions and China's recent interference in stock markets have raised some concerns.

The Shanghai International Energy Exchange, also known as INE, circulated a draft of the futures contract to market participants last month, saying the launch could happen as early as October, the sources who saw the draft, told Reuters.

China, the world's second-biggest oil consumer, has already begun to loosen its grip on the physical oil sector this year by granting quotas for imported crude to privately-owned refiners for the first time, surprising market participants with the speed of reform. "The development of a futures market is closely linked to the physical market," INE said in a statement issued to Reuters in response to questions about the new contract. "The more physical players participate, the better the liquidity of the futures market will be." The launch of Shanghai crude futures won state approval last year and would be the first Chinese contract that allows direct participation by international investors.

A Shanghai-based contract will compete in the crude futures market, which is worth of trillions of dollars and is dominated by two contracts, London's Brent, seen as the global benchmark, and WTI, the key US price.
...
Source: Business Times Breaking News

For those who think oil prices will eventually climb, but the period of low oil prices may persist for a long time, there is an option.

You can invest in mid stream MLP via a ETN like that issued by UBS. A MLP is like the equivalent of a business trust in Singapore. A mid stream OnG MLP is typically a infrastructure play (oil pipelines, transportation, oil storage tanks etc). They typically get fee based revenue that is relatively stable.

A ETN theoretically has counterparty risk since you are essentially lending money to the issuer. But it has tax advantages because it's dividends are regarded like bond coupons. For example, I hold one, and it has no withholding tax deducted when paid to me (this of course can change if the US tax authorities change policy).

Right now, the oil price has pushed all OnG counters down, including mid stream MLPs (which should have sustainable dividends). So you get potential for capital gain, while collecting dividends.

Traders floored by crude oil price swings

• THE AUSTRALIAN
  
• SEPTEMBER 03, 2015 12:00AM
  

[Image: 995194-2c3427d8-5167-11e5-b4b9-6e09adcdd8b2.jpg]
BP’s oil and gas exploration rig being built in the Hyundai shipyards of South Korea to explore for oil and gas in the Great Australian Bight. Source: Supplied
[b]Commodity markets are renowned for their booms and busts but the past four days in the crude oil market have even experienced traders wide-eyed.[/b]
The price of oil plunged 8 per cent on Tuesday, following a three-day ascent of 27 per cent, the biggest such jump in 25 years.
“It’s wild!” said Phil Flynn, energy analyst at the Price Futures Group. “Buckle up.”
The stockmarket has been volatile too, but nothing like oil. The S&P 500 has moved by 6 per cent or more only once since 2008. Oil has moved by at least 6 per cent each of the past four trading days.
Big moves — mostly down — have been a hallmark of the oil market over the past year. Starting last northern summer oil began to fall, sliding from near $US100 a barrel to under $US45 in March. US oil production was booming, OPEC nations kept oil flowing and even rising demand wasn’t enough to absorb the flood of oil.
Then oil’s moves became more sudden in the northern spring and summer. Oil rose 25 per cent in April. It fell 21 per cent in July. It sank to a low of $US38.24 last Monday, the lowest since the depths of the recession in 2009.
The big decline in price was easy to explain. Against a backdrop of rising supply came mounting evidence that demand for oil would be far less than expected.
The plummeting stockmarkets in China and the government’s decision to devalue its currency led to fears that growth there was slowing sharply. Japan, the world’s third largest oil consumer, revealed that its economy contracted in the second quarter. And growth in Europe appeared to be in peril.
At the same time, the US and Iran reached an agreement that could lift sanctions against the OPEC nation, paving the way for more Iranian oil to return to the market, adding to the oversupply.
But the market was clearly uncomfortable with oil under $US40, traders say. And, at any sign that perhaps supply and demand weren’t quite so out of whack, they were ready to buy.
China’s stockmarket soared last week, a possible signal that the worst was over. On Monday, the US Energy Department changed how it estimates domestic oil production and revised its numbers lower. A bulletin from OPEC suggested the cartel might be ready to work with other nations to restrict production.
Traders stepped in, leading to the nearly 30 per cent jump in prices over the span of a few days.
Still, some weren’t impressed. Citibank’s Ed Morse on Monday wrote that the surge was a “false start” brought on by trading technicalities, a “gross misrepresentation” of OPEC’s intentions and confusion about the Energy Department’s new methodologies. He predicted oil would head lower.
That call looked prescient on Tuesday when oil plunged 7.7 per cent after weak manufacturing data out of China.
AAP