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Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in

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13 hours ago, Andrei Moutchkine said:

Well, they did. Kazakhstan is full of them, and suddenly is a 2nd or 3rd most popular mining jurisdiction.

They just packed up their racks and buildings and threw them onto a truck bed? 

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(edited)

Oil Spikes Amid Rumor Of Texas Power Shock

Tyler Durden's Photo
by Tyler Durden
Thursday, Jul 07, 2022 - 08:52 AM

With oil slumping into a deep bear market, tumbling (briefly) below $100 yesterday and just shy of where it traded before the Ukraine war, the Biden administration is preemptively declaring victory: after all, between sliding oil prices, refineries finally working in lockstep and spreads collapsing, it's no surprise we have seen gasoline prices drop for the past 22 days, the longest stretch since the covid depression.

Sadly for Biden, this steep drop in both oil and gasoline prices is unlikely to stick, and not just because the fund liquidation that sent oil so sharply lower is in wild contrast with the wildly bullish dynamics in the physical market where the prompt WTI spread surged higher on Wednesday, climbing by the most in four months and hitting the highest in recent history.
 

WTI%20prompt%207.7.jpg?itok=jn4co3wk

Nor because if reports of a $220BN Chinese stimulus are true, it means that Beijing is about to order every barrell of oil it can find. The real reason why oil may be about to spike sharply higher comes out of Texas where an imminent power shock may lead to widespread oil infrastructure shutdowns.

Here is what a dealer for one of the larger institutional crude and products books writes in:

... looking like Texas may be short power for the next week or so. Wild rumors floating around that the Governor may call on industrials (ie refineries) to idle or significantly de-rate plants for up to a week to keep from having to black out residential consumers (Mom&Pop) in a heat wave. Don’t want to make folks sweat at home in the dark during an election year.

Key takeaway? Cracks may just be getting started and could go parabolic here.

And if cracks soar, underlying prices won't be far behind. And yes, gasoline prices are about to reverse all recent losses with a vengeance. As for oil,  well the reversal is already starting.

2022-07-07_06-42-36.jpg?itok=AeZcmvqH

https://www.zerohedge.com/markets/oil-spikes-amid-rumor-texas-power-shock

Edited by Tom Nolan

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8 hours ago, KeyboardWarrior said:

They just packed up their racks and buildings and threw them onto a truck bed? 

Beats me. Probably, just the racks...?

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Goldman's chief commodity strategist Jeffrey Currie...first noted in "Inside The Oil Market's Jekyll-And-Hyde Moment", Currie also writes that "this latest commodity sell-off is completely delinked from physical fundamentals and driven by financial liquidation." ...

...Currie writes, he views this price pullback as a longer-term buying opportunity, and barring a large synchronous negative global demand shock that creates a level-shift down in demand, demand rationing will remain the dominant theme for energy and food commodities while an accelerated stimulus program in China should help to create a turnaround in base metals pricing in Q3. ...

...

the key to Goldman's bullish view is that "the current oil deficit remains unresolved, with demand destruction through high prices the only solver left as still declining inventories approach critically low levels."

Additionally, and as Goldman has explained in the past, the bank continues to see the oil market in a structural deficit that requires still higher prices to rebalance. Indeed, the oil market remained tighter than we had expected, reducing global inventories, after a record drawdown of 1350 million bbls to levels that were significantly lower than Goldman had previously expected. This more than offset the recent April-May surplus, the first after a record-long 23 months of deficits. This shift to surplus was driven by lower Chinese demand, record large SPR releases and a smaller-than-expected decline in Russian exports.

Notably, Goldman calculates that this surplus has now already come to an end, as the rebound in Chinese demand more than offsets the resilience in Russian exports, pushing inventories to historical new record lows. This deficit will likely persist at current oil prices given the expected moderate recovery in Chinese demand and declines in Russian exports (amid EU sanctions). While Goldman remains cautious on both, it expects the decline in Russian exports to accelerate from 0.3 mb/d to reach 1.5 mb/d by 1Q23 (versus 4Q21) given the logistical difficulties of now having to re-route nearly 5 mb/d of Western exports. ....

https://www.zerohedge.com/commodities/why-goldman-buying-every-barrell-oil-it-can-find

Why Goldman Is Buying Every Barrel Of Oil It Can Find

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https://oilprice.com/Energy/Energy-General/Why-Natural-Gas-Stocks-Are-Outperforming-Oil-Stocks.html

Why Natural Gas Stocks Are Outperforming Oil Stocks

By Alex Kimani - Jul 19, 2022, 5:00 PM CDT

  • Oil stocks have seen a heavy sell-off in the past couple of weeks as oil prices plunged on fears of a recession, a brawny dollar, and a hawkish Fed.
  • Natural gas stocks, on the other hand, have continued to soar as the global shortage brought about by Russia’s invasion of Ukraine shows no sign of easing.
  • Meanwhile, heatwaves in both Europe and the U.S. are sending demand for natural gas even higher, adding to the upside for natural gas stocks.

Over the past couple of weeks, oil stocks have sold off heavily, reversing a good chunk of their early-year gains thanks to a drop in oil prices due to worries of a recession, a brawny dollar, and an overly hawkish Fed.

As Citi analyst Scott Gruber has told Barron's, oil producers and oil service firms may be in "stock purgatory" for now, in part because fund managers worry that oil prices have more room to fall if a recession hits.

The energy sector's best-known benchmark, the Energy Select Sector SPDR ETF (NYSEARCA:  XLE) has lost 7.4% over the past month and seen its year-to-date returns fall to 24.9%. Meanwhile, the oil services counterpart, iShares U.S. Oil Equipment & Services ETF (NYSEARCA: IEZ) has fared even worse, losing 12.3% over the past 30 days and seeing its YTD returns trimmed to just 8.7%.

This week, oil prices reversed their trajectory after the Fed signaled it would go with a 75-point rather than a 100-point one, while the dollar has pulled back from its recent 20-year high. Still, they are a long way off their recent highs in the $120s/bbl range and lack strongly bullish catalysts to propel them forward with recession fears still rampant.

But the natural gas sector is a different beast.

You can tell that by the momentum of stocks of natural gas producers, with the United States Natural Gas Fund, LP (NYSEARCA: UNG) boasting a 91.9% YTD gain, and has even managed to add 8.0% over the past month.

According to Gruber, investors are more interested in buying gas-focused producers, thanks in large part to Russia's invasion of Ukraine, which has imperiled global natural-gas supplies, with serious concerns about Russia cutting off Europe if the west succeeds in implementing price caps. Indeed, there are growing concerns that flows may not be restored following the completion of maintenance work on Nord Stream 1. Russian national oil company Gazprom has already declared force majeure on at least three European gas buyers, meaning their supplies may be capped.

While natural gas has historically been used mostly for heating, it has become a more prominent source of electricity generation here in the U.S. and elsewhere. Meanwhile, heat waves in Europe and the U.S. this summer have seen natural gas demand for cooling purposes go up dramatically. The heat already has raised power demand to record levels in Texas, with ERCOT recently admitting that it was unprepared for this level of demand.

For investors interested in the gas business, here are some top natural gas picks.

 

  • Cheniere Energy

 

Market Cap: 31.6B

YTD Returns: 26.9%      

Cheniere Energy, Inc. (NYSE: LNG) is an energy infrastructure company that primarily engages in the liquefied natural gas (LNG) related businesses in the United States. Cheniere is one of the few pure-play LNG companies in the United States; the company owns and operates the Sabine Pass LNG terminal in Cameron Parish, Louisiana; and the Corpus Christi LNG terminal near Corpus Christi, Texas. The company also owns Creole Trail pipeline, a 94-mile pipeline interconnecting the Sabine Pass LNG terminal with various interstate pipelines; and operates the Corpus Christi pipeline, a 21.5-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with various interstate and intrastate natural gas pipelines. 

Back in March, the DoE approved expanded permits for Cheniere Energy's Sabine Pass terminal in Louisiana and its Corpus Christi plant in Texas. The approvals allow the terminals to export the equivalent of 0.72 billion cubic feet of LNG per day to any country with which the United States does not have a free trade agreement, including all of Europe. Cheniere says the facilities already are making more gas than is covered by previous export permits.

 

  •  EQT Corp.

 

 Market Cap: 13.6B

 YTD Returns: 78.0%     

EQT Corporation (NYSE: EQT) operates as a natural gas production company in the United States. The company produces natural gas, natural gas liquids (NGLs), including ethane, propane, isobutane, butane, and natural gasoline. 

As of December 31, 2021, EQT had 25.0 trillion cubic feet of proved natural gas, NGLs, and crude oil reserves across approximately 2.0 million gross acres, including 1.7 million gross acres in the Marcellus play. 

EQT Corp. has unveiled a plan centered on producing more liquified natural gas by dramatically increasing natural gas drilling in Appalachia and around the country's shale basins, as well as pipeline and export terminal capacity, which it said would not only boost United States energy security, but also help break the global reliance on coal and on countries like Russia and Iran.

 

  • Ovintiv 

 

Market Cap: $11.2B

YTD Returns: 28.8%

Ovintiv Inc.(NYSE: OVV) is a Denver, Colorado-based energy company that, together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids.

The company's principal assets include Permian in west Texas and Anadarko in west-central Oklahoma, and Montney in northeast British Columbia and northwest Alberta. Its other upstream assets comprise Bakken in North Dakota, and Uinta in central Utah; and Horn River in northeast British Columbia, and Wheatland in southern Alberta. 

Last month, Mizuho upgraded  OVV to $78 from $54 (good for 32% upside to current price), citing improving tailwinds.

 

  • NuVista Energy Ltd

 

Market Cap: $1.7B

12-Month Returns: 36.3%

NuVista Energy Ltd. (OTCPK: NUVSF)(TSX: NVA) is a  Calgary, Canada-based oil and natural gas company that engages in the exploration, development, and production of oil and natural gas reserves in the Western Canadian Sedimentary Basin. The company primarily focuses on the condensate-rich Montney formation in the Wapiti area of the Alberta Deep Basin. 

NuVista is reaping huge dividends for its massive investments in the natural gas business.

Last year, the company's adjusted cash flows more than doubled and allowed the company to pay down a significant amount of its long-term debt. The company is targeting a long-term sustainable net debt target of less than 1.0 times adjusted funds flow in the stress test price environment of US$ 45/Bbl WTI and US$ 2.00/MMBtu NYMEX natural gas, representing a target net debt level of $200 - $250 million.

 

  • Birchcliff Energy Ltd

 

Market Cap: $1.8B

12-Month Returns: 36.6%

Another Calgary-based energy company, Birchcliff Energy Ltd.(OTCPK: BIREF)(TSX: BIR) is an intermediate oil and natural gas company, acquires, explores for, develops, and produces natural gas, light oil, condensate, and natural gas liquids in Western Canada.

The company holds interests in the Montney/Doig resource play located approximately 95 km northwest of Grande Prairie, Alberta. Its asset portfolio also includes various other properties, including the Elmworth and Progress areas of Alberta. As of December 31, 2021, the company had interests in 200,712 net acres of undeveloped land, as well as proved plus probable reserves of 1,022 million barrels of oil equivalent. 

A couple of years ago, Birchcliff was struggling thanks to low natural gas prices and a high net debt position. But the situation has improved dramatically, and Birchcliff is taking advantage of the strong gas price to rapidly reduce its net debt.

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com:

Latest articles from Alex

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https://oilprice.com/Energy/Energy-General/Are-Oil-Prices-Set-To-Rally-Once-Again.html

Are Oil Prices Set To Rally Once Again?

By Tom Kool - Jul 19, 2022, 11:00 AM CDT

While it is always risky attempting to forecast oil prices when volatility is soaring, the recent return above $100 for both WTI and Brent suggests fundamentals might once again be in the spotlight and a sustained price rally could be on the horizon.

Oil prices

Rig

Rig

Chart of the Week

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- Dropping copper prices are often viewed as a crucial indicator in forecasting a future economic recession, hence the nickname Dr. Copper, and it seems that we have entered exactly that period. 

- Since April, copper has lost almost a third of its value as inflation is creeping ever-closer to double-digit territory in both the US and Europe, suggesting economic momentum is slowing. 

- Nominal interest rates on longer-term US treasuries have already started to weaken - the 10-year treasury rates fell to 3% recently - in another cautionary indicator of growth decelerating. 

- Having hit the lowest rate since November 2020 late last week at 6,955/mt, copper prices have seen some respite this week on the back of China promising support for its embattled property sector.  

Market Movers

- US oil services major Halliburton (NYSE:HAL) posted a 41% year-on-year increase in Q2 profits, arguing that it has years of solid demand ahead of it. 

- One of Europe’s largest wind farms, the 475 MW Nysater project in Sweden operated by RWE (ETR:RWE) with Nordex-designs turbines hit the headlines this week as its turbine collapsed amid an alleged oil spill.  

- Canadian oil producer Suncor Energy (TSE:SU) has agreed to bring in three new independent directors and sell its retail business, as part of its agreement with activist investor Elliott Investment.  

Tuesday, July 19, 2022

As volatility soars, it is increasingly difficult to forecast what oil markets will do in the short term. Despite that fact, seeing oil prices climb again on the back of lower US Fed rate hikes and an overall weakening dollar, one might be tempted to believe we are back in a fundamentals-driven market. There might be a temporary pricing downside in Libya coming back online, but in the larger picture supply is undoubtedly lagging behind demand by a wide margin. 

US Permian Production to Hit Record in August. According to the IEA’s DPR report, output in the Permian Basin is due to increase to an all-time high of 5.445 million b/d, up 80,000 b/d compared to this month’s rate, bringing total shale production to 9.1 million b/d.

Germany Wants its Nuclear Reactors Back. Germany’s economy ministry indicated Berlin may extend the lifespan of its three remaining nuclear power reactors, responsible for 6% of the country’s electricity generation, as they remain scheduled to be shut down by year-end 2022. 

Gazprom Deflects Blame for Europe’s Gas Squeeze. Russia’s pipeline gas monopoly Gazprom told customers in Europe that its supplies have been in force majeure since June 14 as extraordinary circumstances beyond its control forced it to cut gas exports via Nord Stream 1.

Tensions Rise as Libya Lifts Force Majeure. The newly-designed head of Libya’s NOC Farhat Bengdara has called on all port blockades to be lifted, only several days after the Tripoli government stormed the headquarters of the national oil company and initiated talks with tribal leaders.

Biden Climate Bill Derailed Again. President Biden has pledged to take strong executive action after Senator Joe Manchin voted against a green bill that would have provided up to 300 billion in multi-year tax incentives for clean energy, an integral part of the US’ Paris Agreement roadmap. 

EU Signs Azerbaijan Gas Deal. As we indicated last week, the European Union signed a memorandum of understanding with Azerbaijan, a move designed to double imports of natural gas to at least 20 bcm by 2027, up from 12 bcm this year.  

Venezuela Operations Disrupted by Pipeline Blaze. Refinery operations in Venezuela’s key Jose complex were halted after a fire broke out on the Muscar-Soto gas pipeline, with the head of PDVSA Tareck El Aissami labeling it a “terrorist attack”.

US Wants to End Dependence on Chinese Rare Earths. According to US Treasury Secretary Janet Yellen, the United States wants to “friend-shore” its China rare earths dependence by supporting new capacity in friendly countries, such as South Korea or Japan.

Russia and China to Start Building New Gas Pipeline. The construction of the Power of Siberia-2 gas pipeline, delivering Russian gas via Mongolia to China, will most probably start in 2024, with its throughput capacity maximized to 50 bcm per year.

Russia Uses UAE Dirhams as Oil Currency. According to recently published reports from Reuters, at least two Russian sellers are demanding that Indian buyers carry out payment following a crude cargo delivery in UAE dirhams instead of the usual US dollars. 

Saudi Arabia Cools Expectations of Spare Capacity. Saudi crown prince Mohammed bin Salman said it would take five years to boost Saudi Arabia’s crude production capacity from the current 12 million b/d to 13 million b/d, adding that there won’t be any capacity beyond that threshold.

TotalEnergies Wants to Lock In UAE Exports. French oil major TotalEnergies (NYSE:TTE) has been courting UAE national oil company ADNOC to clinch a diesel supply deal in 2023 when Russian products would be banned by the European Union. 

Heatwaves Stretching US Grids. According to US grid operators in Texas and Southwest, this week will see unprecedented power use across the region amidst triple-digit temperatures, already pushing ERCOT North Hub power prices to $220 per MWh.

By Tom Kool for Oilprice.com

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'Complacency rally' coming: Chris Vermeulen is loading up on this before the real crash comes

https://www.youtube.com/watch?v=QwOMJexHLIk

Chris Vermeulen, Chief Market Strategist at TheTechnicalTraders.com, discusses his new buy signals with David Lin, Anchor for Kitco News.

0:00 - Rotating back into growth 1:55 - Complacency rally 5:46 - Buy signals 10:45 - Position hierarchy 14:20 - S&P 500 16:00 - Stocks to buy 18:45 - Gold

 

1292258597_EmotionsofMarketParticipants-ChrisVermeulen.thumb.png.b3cbdfb8d4580fb410b259027678b3a0.png

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4 hours ago, Tom Nolan said:

'Complacency rally' coming: Chris Vermeulen is loading up on this before the real crash comes

https://www.youtube.com/watch?v=QwOMJexHLIk

Chris Vermeulen, Chief Market Strategist at TheTechnicalTraders.com, discusses his new buy signals with David Lin, Anchor for Kitco News.

0:00 - Rotating back into growth 1:55 - Complacency rally 5:46 - Buy signals 10:45 - Position hierarchy 14:20 - S&P 500 16:00 - Stocks to buy 18:45 - Gold

 

1292258597_EmotionsofMarketParticipants-ChrisVermeulen.thumb.png.b3cbdfb8d4580fb410b259027678b3a0.png

Is The Tide Turning For Tech After A Brutal First Half?

Tyler Durden's Photo
by Tyler Durden
Tuesday, Jul 26, 2022 - 10:06 AM

By Michael Msika, Bloomberg Markets Live commentator and reporter

The early signs from this reporting season haven’t been great for tech stocks, but that isn’t putting off those investors seeking to jump back in at reduced valuations. Optimism that inflation may soon start to slow and the Federal Reserve become less hawkish has seen growth stocks, and tech in particular, stage a comeback.

Since the market low on July 5, the Stoxx 600 Technology index has soared 15% and is the best-performing subgroup in Europe. That’s despite underwhelming second-quarter earnings and guidance cutsfrom the likes of ASML and SAP.

“The turn in interest rates suggests that the recent better performance of growth style over value can continue,” say JPMorgan strategists led by Mislav Matejka. Softening macro-economic indicators “could open the doors to a more balanced Fed,” they say, seeing an opportunity for stocks including ASML and Adyen.

catching%20bid.jpg?itok=wxMaU_1W

After a 32% drop in the first half of the year, Europe’s tech subindex may already be pricing in a major slowdown. Yet it still isn’t cheap, with a forward price-earnings ratio exceeding 21, an 80% premium to the broader market. And valuations show an inverse correlation to real yields, which are currently receding.

“Growth stock valuations are no longer expensive, but not yet depressed,” say Goldman Sachs strategists including Ryan Hammond, warning about non-profitable growth stocks that may need to raise capital to stay solvent, in a difficult environment of tightening financial conditions.

big%20driver.jpg?itok=ehjSV_CJ

The next Fed decision on Wednesday will offer some more clues about the central bank’s hawkishness going forward, with a rate hike already a given in view of still rampant inflation, but with all eyes on the message.

“The growth trajectory is already low enough and a ‘monster’ hike would be unnecessarily risky, especially as it might trigger a substantial repricing and would make it harder for the FOMC to control market expectations going forward,” says Generali Investments economist Paolo Zanghieri, who expects a 75 basis-point hike.

Technically, the picture is positive, though the rise may be temporary. “Some sort of recovery is at hand,” says DayByDay technical analyst Valerie Gastaldy. Looking at the relative ratio of the tech subindex and the Stoxx 600, the analyst says the recovery has further to run, to at least 1.518, and maybe higher.

starting%20bounce.jpg?itok=Mi7gWpv6

“Investors still have a love affair with growth stocks, particularly tech given their outstanding performance over the past decade,” say Morgan Stanley strategists led by Michael Wilson. “However, many of these stocks are more economically sensitive than many still appreciate and if recession is coming, these stocks will not do well.”.

https://www.zerohedge.com/markets/tide-turning-tech-after-brutal-first-half

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And why Putin is catching up a bit to the US now.

In short, the price of oil has not risen as much as expected.

On the other hand, the volume of Russian oil did not fall too much - perhaps 0.5 million. The World Energy Agency expected a decline of 3 million. barrels.

On the other hand, Putin's profit, as Kommersant claims, is that in April the discount on Russian oil to brent reached $ 35, but the first shock has passed and now it has dropped to $ 15, meaning that at the same price, Russia rebated $ 20

 

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17 hours ago, Tomasz said:

And why Putin is catching up a bit to the US now.

In short, the price of oil has not risen as much as expected.

On the other hand, the volume of Russian oil did not fall too much - perhaps 0.5 million. The World Energy Agency expected a decline of 3 million. barrels.

On the other hand, Putin's profit, as Kommersant claims, is that in April the discount on Russian oil to brent reached $ 35, but the first shock has passed and now it has dropped to $ 15, meaning that at the same price, Russia rebated $ 20

 

Try this

https://www.neste.com/investors/market-data/urals-brent-price-difference

Used to be authoritative, maybe still is. In short, a good half of this discount was normal even before the sanctions. ~10% discount on Urals vs. Brent was there most of the time.

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The best trading tips you'll hear: Gareth Soloway's principles to becoming a master trader

https://www.youtube.com/watch?v=uni_Ck5yf-A

Gareth Soloway, Chief Market Strategist at InTheMoneyStocks.com, discusses with David Lin, Anchor for Kitco News, the most important principles a trader should abide by.

0:00 - Gareth Soloway's personal background 8:26 - Trading mistakes Gareth has made 11:57 - Personal Discipline 18:48 - Flipping a coin 23:00 - Be a robot: control your emotions 27:40 - Chart reading techniques 31:10 - Exit strategies/taking profits 37:50 - Leverage and trading 39:10 - Crypto exchange vs wallets 41:00 - Gareth's time horizons 42:40 - When will the NASDAQ bottom? 43:20 - How low does Bitcoin go? 48:40 - Resources for beginner traders 51:32 - What if china invades Taiwan? 53:20 - Macro trades 55:15 - Options trades 57:18 - How will interest rate hikes hurt economy? 1:00:00 - Hedging against Black Swan events 1:01:00 - Winning Trader's Series

Video: Winning Trading Strategies Revealed by Trading Pro

https://www.thestreet.com/investing/winning-trading-strategies-revealed-gareth-soloway#gid=ci02a72e23e00026ec&pid=gareth-soloway-president-cfo-chief-marketing-strategist-inthemoneystockscom

How to Become a Master Trader - Step-by-Step Guide

https://www.thestreet.com/investing/how-to-become-master-trader-guide

 

 

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Commodities Trading: The Secret Behind Big Oil’s Bumper Earnings

By Alex Kimani - Aug 03, 2022, 7:00 PM CDT

  • Energy traders saw their profits spike during the pandemic, and continue to perform well in 2022.
  • BP has managed to build one of the most successful energy trading ventures.
  • Massive trading floors that sometimes rival Wall Street’s biggest banks are becoming increasingly important to oil companies.

Dozens of giant commodity and energy traders saw their profits explode during the pandemic thanks to their ability to leverage their storage facilities, global network of terminals and shipping fleets to cash in on supply disruptions, soaring energy prices and rising demand. 

Vitol Group, the world’s largest commodity trader, generated record net income of $4.2 billion last year, with rival Mercuria raking in $1.25bn. Vitol announced a major share buy back to the tune of US$3 billion as a way of rewarding the roughly 450 senior staff who own the company. Glencore Plc also enjoyed record numbers, as did Trafigura’s trading arm. Smaller trading desks that lack the wherewithal and deep infrastructure networks of the giants were, unfortunately, unable to take advantage of one of the most volatile--and profitable--periods in the global energy industry.

But energy commodities trading is by no means the sole preserve of independent trading desks. Scores of Big Oil companies have set up secretive and sprawling trading divisions which frequently add billions of dollars to their bottom-lines.

1659560420-o_1g9io4n0o1921j34fnhgg7jne8.

Source: Financial Times

BP’s Trading Genius

Whereas several U.S. oil companies have tried their hand in oil trading, it’s European oil and gas supermajors that seem to have perfected the art and science of leveraging volatile oil markets to reap big profits.

To wit, last year, Exxon Mobil (NYSE: XOM) famously ditched its effort to build an energy trading business to compete with those of European oil majors after a period of low oil prices forced the company to heavily cut the unit’s funding amid broader spending cuts. The cuts left Exxon traders without sufficient capital to take full advantage of the volatile oil market. The coronavirus pandemic sent oil and gas prices crashing, before a strong rebound created an immense profit opportunity for trading operations willing to take on the risk. Unfortunately, cash flow problems and pressure from investors forced Exxon to systematically avoid risk by pulling most of the capital needed for speculative trades, limiting its traders to working only with longtime Exxon customers and subjecting most trades to high-level management review.

Related: German Chancellor: Germany Could Keep Nuclear Power Plants Operating After All

BP Plc. (NYSE: BP), on the other hand, has managed to build one of the most successful energy trading ventures by an oil and gas major.

In its latest earnings call, the European supermajor reported that its underlying replacement cost profit--a metric similar to the net income figure commonly used by U.S. oil companies--climbed to $8.45 billion in the second quarter from $6.25 billion in the first quarter, reflecting strong refining margins, higher liquids realizations and exceptional oil trading performance. That figure was well above Wall Street’s expectations of $6.79 billion. 

"The main driver of the large beat was another exceptional quarter of oil products trading," RBC Capital Markets said in a note.

But those record profits were by no means a fluke. BP’s trading desk has been astute at taking advantage of highly volatile energy markets in the past, with former CEO Bob Dudley and his army of 3,000 traders displaying an uncanny ability to predict the oil price trajectory. For instance, Dudley famously told the media that “Prices will remain low for longer,” after oil prices plunged to their lowest in more than a decade in Jan. 2016. This time, though, his well-known mantra came with a kicker: “But not forever.”

Few grasped the special significance of Dudley’s comment. In essence, BP traders had turned bullish after months of slumping oil prices. BP’s trading arm argued that the price had fallen so far that it could only go up, and Dudley agreed. And, in complete secrecy, the company was willing to bet that its traders were right again and put its money where its mouth was. Indeed, Dudley authorized a daring trade that saw BP place a large bet on a rebound in oil prices. BP was already heavily exposed to (low) oil prices, yet it chose to double down in a bid to increase the exposure by buying futures contracts much as a hedge fund would. This wager, worth hundreds of millions of dollars, remained a closely guarded secret for years and was only divulged by Bloomberg in 2021.  BP quietly bought Brent crude futures London on a “management position’’--a trade so large it had to be overseen by the company’s most senior executives.

And, the gamble paid off. By early February, oil prices were up a third, trading above $35 a barrel. By the end of May, oil prices hit $50 a barrel. A former BP executive with direct knowledge of the trade told Bloomberg that it “made a lot of money,” putting the payout at $150 million to $200 million. Publicly, however, BP said almost nothing.

BP’s rivals Shell Plc (NYSE: SHEL) and TotalEnergies (NYSE: TTE) are also some of the world’s largest commodity traders. Shell is actually the world’s largest oil trader, ahead of independent houses such as Vitol Group and Trafigura.

Massive trading floors that sometimes rival Wall Street’s biggest banks are becoming increasingly important to oil companies thanks to fears that global oil demand will soon fall off due to the global energy transition as well as concerns about climate change. However, much about the oil majors’ trading exploits go unreported, just like BP’s 2016 trade. But few shareholders would object: BP typically records from $2 billion to $3 billion annually from its trading desk, roughly equal to what the company’s upstream business generates in a normal year; Shell makes as much as $4 billion in pretax profit from trading oil and gas while French major Total is not far off.

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com:

https://oilprice.com/Energy/Crude-Oil/Commodities-Trading-The-Secret-Behind-Big-Oils-Bumper-Earnings.html

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How Commodity Traders Are Helping Fund Russia’s War

By Alex Kimani - Aug 02, 2022, 5:00 PM CDT

  • Despite a plethora of sanctions and boycotts, Russia has managed to export nearly a billion dollars worth of fossil fuels per day since its invasion of Ukraine.
  • Commodity traders from Switzerland, Singapore, and Dubai are acting as middlemen in the energy transactions between Russia and the buyers.
  • Commodity trading is largely under-recorded and under-regulated, meaning that these transactions are hard to track.

https://oilprice.com/Energy/Energy-General/How-Commodity-Traders-Are-Helping-Fund-Russias-War.html

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https://oilprice.com/Energy/Crude-Oil/Why-Oil-And-Gas-Executives-Are-Reluctant-To-Pull-The-Trigger-On-New-Deals.html

Why Oil And Gas Executives Are Reluctant To Pull The Trigger On New Deals

By Alex Kimani - Aug 04, 2022, 4:00 PM CDT

  • U.S. oil and gas dealmaking contracted 65% Y/Y to $12 billion last quarter.
  • Big Oil executives have become increasingly hesitant to pull the trigger after the last M&A wave turned into a disaster for acquiring companies.
  • Demand destruction concerns and recession fears have made acquiring companies more cautious

The last two energy crises that threatened hundreds of energy companies with bankruptcy have rewritten the O&G M&A playbook. Previously, oil and gas companies made numerous aggressive tactical or cyclical acquisitions in the wake of a price crash after many distressed assets became available on the cheap. However, the 2020 oil price crash that sent oil prices into negative territory has seen energy companies adopt a more restrained, strategic, and environment-focused approach to cutting M&A deals.

It’s therefore hardly surprising that Big Oil executives have become increasingly hesitant to pull the trigger after the last M&A wave turned into a disaster for acquiring companies.

According to data released by energy analytics firm Enverus, U.S. oil and gas dealmaking contracted 65% Y/Y to $12 billion last quarter, a far cry from $34.8 billion in last year’s corresponding period, as high commodity price volatility left buyers and sellers clashing over asset values.

"The spike in commodity prices that followed Russia’s invasion of Ukraine temporarily stalled M&A as buyers and sellers disagreed on the value of assets," said Andrew Dittmar, a director at Enverus Intelligence Research.

U.S. benchmark crude oil futures prices briefly spiked to more than $130 a barrel in early March, shortly after Russia invaded Ukraine, but prices have since cooled thanks to recession worries, a fresh wave of Covid-19 as well as demand destruction concerns. Last quarter's high oil and gas prices triggered a rebound in M&A activity, especially from private equity firms.

Enervous has reported that deals by private equity firms saw a significant uptick in the first quarter as they bought assets that oil companies deemed as non-core to their development plans. These assets tended to lay outside oil-prolific areas like the Permian Basin of West Texas and New Mexico.

Related: Saudi Arabia And The UAE Won’t Be Tapping Emergency Oil Capacity

Private equity still has dry powder for deals. They are using this to target assets being tagged as non-core by public companies. Once you step out of the core of the Permian Basin and a few other key areas, competition for deals drops, and these positions are often available at buyer-friendly price points. That said, private equity is still a net seller in the space and likely to remain so for the foreseeable future given the number of investments outstanding and how long that capital has been deployed,” Dittmar has remarked.

Further, there are growing concerns that high oil prices might have caused significant demand destruction, which could hamper an oil price recovery.

On Wednesday, we saw crude oil futures give up their modest gains and dip lower after data from the Energy Information Administration (EIA) revealed unexpected increases in U.S. crude and gasoline inventories.

On Thursday, WTI September crude oil fell to $88 per barrel while October Brent crude fell to $94 per barrel.

U.S. crude inventories jumped by 4.5M barrels to 426.6M barrels, with crude oil stored at the Cushing, Oklahoma, hub increasing by 926K barrels from the previous week to 24.5M barrels, while gasoline stockpiles added 163K barrels to 225.3M barrels. The four-week average of U.S. gasoline consumption is now more than 1M bbl/day below pre-COVID seasonal levels, despite pump prices having fallen for 50 straight days.

There’s another reason though why Big Oil has gone cold on M&A.

M&A Disaster

Cowen analysts have pointed out how the last M&A wave turned into a disaster for the acquiring companies.

In 2020,  Shell Plc (NYSE: SHEL) cut its dividend by a hefty 66%. That marked the first time the company cut the dividend since WWII, a testament of just how severe the oil massacre was, which is what Shell blamed in its press release. However, another culprit was blamed for the dramatic cut: the company’s 2016 acquisition of BG Group, which set it back a whopping $60B.

Occidental Petroleum’s (NYSE: OXY) $55B leveraged purchase of Anadarko quickly became the poster-child of oil and gas mergers gone bad. The deal quickly turned into a nightmare, leaving the company in deep distress over its mountain of debt and water cooler wisecracks of how it could itself get acquired at a fraction of what it paid for Anadarko.

Cowen also pointed at BP Plc.’s (NYSE:BP) high debt, though it might have less to do with its 2018 merger with BHP Billiton for $10.5B and more to do with its Deepwater Horizon oil spill which has cost it a staggering $65B in clean-up costs and legal fees over the years.

BP’s debt-to-equity ratio of 0.96 is more than double the oil and gas sector’s average of 0.44, and the highest among the oil supermajors. 

Luckily, the situation has improved dramatically since the 2020 oil price crash, with the vast majority of shale companies now printing millions in profits and free cash flow even at current oil prices. We, therefore, could see more M&A activity down the line.

By Alex Kimani for Oilprice.com

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https://oilprice.com/Latest-Energy-News/World-News/Analyst-Oil-To-Hit-120-Again-By-Winter.html

Analyst: Oil To Hit $120 Again By Winter

By Charles Kennedy - Aug 08, 2022, 1:30 PM CDT

While oil and gas prices may continue to weaken in the near term, by the time winter sets in, the market is going to become extremely tight and the per-barrel price of oil should return to around $120, Energy Aspects’ Amrita Sen told Bloomberg Surveillance on Monday. 

Sen suggests that while gasoline prices have declined, demand remains strong. Sen cites petrochemical weakness due to China’s back-and-forth COVID lockdowns, which have contributed to the high availability of nafta to be blended into gasoline. However, she insists this is “not a demand problem; it’s a supply problem”. 

The national average per gallon of gasoline in the United States continued to fall on Monday, dropping to $4.059, according to AAA.

At the same time, crude oil prices are solidly below $90 per barrel. 

Sen said she is not expecting a “sudden increase” in prices due to upcoming seasonal refinery maintenance; however, by the time winter hits, and particularly after November, she expects supply to become “very, very tight”. 

On November 1st, releases from the U.S. Strategic Petroleum Reserve (SPR) will halt. In March this year, the Biden administration ordered the release of 1 million barrels per day from the country’s emergency crude stockpile in a bid to lower gas prices. Last week, the SPR fell to its lowest level in nearly four decades, according to the U.S. Department of Energy data

The stoppage of the SPR releases will then be followed by the implementation on December 1st of the European Union’s embargo on Russian crude. 

This will also coincide with the meeting of the China party congress, which Sen says she believes could make way for some easing of the COVID lockdown restrictions that have tampered with demand. 

“The market is going to tighten up very, very quickly,” Sen told Bloomberg. “We still maintain our forecast of $120 per barrel,” she added. 

By Charles Kennedy for Oilprice.com

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On 8/9/2022 at 7:34 AM, Tom Nolan said:

 

 

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https://oilprice.com/Energy/Energy-General/FAANG-20-The-Energy-Crisis-Is-Ushering-In-A-New-Era-Of-Growth-Stocks.html

FAANG 2.0: The Energy Crisis Is Ushering In A New Era Of Growth Stocks

By Alex Kimani - Aug 29, 2022, 4:00 PM CDT

  • NASDAQ is already down 22.2% this year, firmly in bear territory. 
  • Big tech is losing its momentum and is slowly being replaced by new areas of rapid growth.
  • The new FAANG consists of fuels, aerospace, agriculture, nuclear and gold.

Over the past decade or so, investing in the U.S. stock market has been pretty straightforward: buy the big names in tech, rinse, repeat. The famous quintuplet of Meta Inc. (NASDAQ: FB) (formerly known as Facebook), Amazon Inc. (NASDAQ: AMZN), Apple Inc. (NASDAQ: AAPL) Netflix Inc.(NASDAQ: NFLX) and Alphabet Inc. (NASDAQ: GOOG)) (formerly known as Google) became so dominant that they made up 20% of the S&P 500 at their peak.

But Putin’s war in Ukraine and the global energy crisis have dramatically altered that playbook.

This year, all 11 sectors in the S&P 500 barring Energy are in the red. Last week, the same scenario played itself out with energy leading and Information Technology the top loser. Here’s a breakdown of their weekly performance:

#1: Energy +4.30%, and the Energy Select Sector SPDR ETF (NYSEARCA: XLE) +4.25%.

#2: Materials -2.52%, and the Materials Select Sector SPDR ETF (NYSEARCA: XLB) -1.26%.

#3: Utilities -2.64%, and the Utilities Select Sector SPDR ETF (NYSEARCA: XLU) -2.56%.

#4: Consumer Staples -3.53%, and the Consumer Staples Select Sector SPDR ETF (XLP) -3.20%.

#5: Health Care -4.06%, and the Health Care Select Sector SPDR ETF (NYSEARCA: XLV) -4.24%.

#6: Industrials -4.17%, and the Industrial Select Sector SPDR ETF (NYSEARCA: XLI) -3.36%.

#7: Real Estate -4.48%, and the Real Estate Select Sector SPDR ETF (NYSEARCA: XLRE) -3.80%.

#8: Financials -5.53%, and the Financial Select Sector SPDR ETF (NYSEARCA: XLF) -3.55%.

#9: Consumer Discretionary -5.84%, and the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY) -4.69%.

#10: Communication Services -6.56%, and the Communication Services Select Sector SPDR Fund (NYSEARCA: XLC) -4.39%.

#11: Information Technology -7.31%, and the Technology Select Sector SPDR ETF (NYSEARCA: XLK) -5.56%.  Nasdaq plummeted 5% on Friday, the worst performer of the major exchanges, and its worst one-day performance since last June. The exchange is now down 22.2% this year, firmly in bear territory. The S&P 500 on Friday posted weekly losses of more than 4% thnks to hawking comments by the U.S. Federal Reserve Chair Jerome Powell at the Jackson Hole symposium.

Global stocks took a $1.3 trillion hit in a single day, with big-cap tech getting hit particularly hard. Global equity funds recorded outflows totaling $5.1 billion in the week through Aug. 24.

New FAANG

In an investor note, Merrill Lynch and Bank of America Private Bank investment strategists Lauren J. Sanfilippo and Joseph P. Quinlan have said that we are in the throes of a new  investing epoch of war and high inflation and energy transformation--one that needs a new FAANG.

“It’s a play on hard assets and hard power. That’s where we’ve been hiding out, it’s been working out well relatively speaking to the rest of the market. In a matter of months, we have gone from a pandemic to Putin; infections to inflation; Big Data to Big Oil; zoom to zinc; masks to mascara; E-commerce to electric vehicles; jabs to javelins; swabs to sanctions; Webex to weddings; boosters to bombs; Non-fungible tokens (NFTs) to liquefied natural gas (LNG); Centers for Disease Control (CDC) to North Atlantic Treaty Organization (NATO); work-from-home to work-from-office; the cloud to cobalt; and lite assets to hard assets.”

Out is the old FAANG and in are the new growth areas of Fuels, Aerospace & defense, Agriculture, Nuclear and renewables, and Gold and metals/minerals aka FAANG 2.0

This cohort is emblematic of a world undergoing profound change. A sampling of this change: energy security is now the top priority of most governments--just ask Poland and Bulgaria, cut off from Russian gas. Global defense spending topped $2 trillion for the first time in 2021 and is headed higher. World food prices are at record highs. Nuclear is poised for a comeback; Electric Vehicle demand continues to soar. Gold is now the preferred asset of central banks thanks to geopolitics, while resource/food nationalism is proliferating around the world, adding even more upside pressure to metal/mineral and food prices,” 

Related: Belgian Energy Minister: Europe Faces Tough Winter Without Gas Price Cuts

The diverging performance of the the old FAANG and FAANG 2.0 is clearly evident:

1661785953-o_1gbl2iiuk1j5t1o1311q33qs1fh

Source: Yahoo

Despite its nearly 50% YTD gain, Jeff Buchbinder says the energy sector still has plenty of upside and has laid out five reasons for oil and gas stocks to continue their run higher.

#1 Strong fundamentals: China’s zero-COVID policy has seen some easing with reopenings after multiple on-and-off lockdowns, helping demand. At the same time, a potential deal allowing Iranian crude to flow freely again could be offset by production cuts from Saudi Arabia.

#2. Earnings momentum: Q2 earnings season was all about energy–the big outperformer, with companies upping the ante with dividend hikes and lots of share buybacks.

#3. Warren Buffett: "We're not saying buy OXY, but rather that if Mr. Buffett likes the energy sector that much, we should pay attention," Buchbinder says.

#4. Valuations are too pessimistic: The sector has been trading at a P-E ratio below 9 based on 12-month forward earnings vs. 17.5 for the broader S&P 500 - Buchbinder says this makes no sense, given sector cash flow yields that are topping 10%, more than double the level for the S&P 500.

#5. Technical factors: Among several that could bode well for energy stocks, breadth has been strong, with 90% of stocks in the S&P 500 energy sector trading at 20-day highs

By Alex Kimani for Oilprice.com

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The Jackson Hole Federal Reserve meeting (Thursday-Saturday) August 25-27.
On Friday after the ‘Fed Speak’, stocks took a fast dive following a few weeks of a “Complacency Rally”.

IMF Deputy Managing Director Gita Gopinath commented on Fed Chair Powell’s Jackson Hole speech:
“Well, I think the point he very firmly and resolutely conveyed was that the priority is to bring inflation down. And that requires staying the course.
And it will take time, and that he sees rates as being close to 4% through 2023. And it’s important not to prematurely loosen policy.
So I think he was very clear that this is the number one priority.
There will likely be pain— some pain for the economy…”

“…Most of these central bankers share the view that the priority was to get back to price stability. And they needed to take strong action to make sure that happens.
And we look at the data, and we have about 85 central banks that have been raising rates multiple times over the past year.
So we are in a global monetary policy tightening cycle….”

https://archive.ph/hqcvR

VIDEO of Powell at Jackson Hole
(5 minutes) – Kitco
Powell’s ‘direct’ anti-pivot message: history warns against ‘prematurely’ slowing down
https://www.youtube.com/watch?v=dFr23l78sec

A pivot from the Federal Reserve is not coming, and interest rates will remain elevated for longer than markets expect, said Federal Reserve Chair Jerome Powell at the Jackson Hole symposium.

“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” Powell said Friday. “The historical record cautions strongly against prematurely loosening policy.”

Powell also did not rule out another 75-basis-point hike at the September meeting, reiterating that a lot will depend on the macro data released in the next three weeks.

“Another unusually large increase could be appropriate at our next meeting,” Powell said. “Our decision at the September meeting will depend on the totality of the incoming data and the evolving outlook.”

The Fed plans to act aggressively now, so inflation does not become entrenched, which is a much costlier scenario to fix.

“The successful Volcker disinflation in the early 1980s followed multiple failed attempts to lower inflation over the previous 15 years. A lengthy period of very restrictive monetary policy was ultimately needed to stem the high inflation and start the process of getting inflation down to the low and stable levels that were the norm until the spring of last year,” Powell noted. “Our aim is to avoid that outcome by acting with resolve now.”

 

 

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Eurasian Alliance Plans A Moscow World Standard To Destroy LBMA's Monopoly In Precious Metals Pricing

Tyler Durden's Photo
by Tyler Durden
Sunday, Sep 04, 2022 - 06:00 AM

Submitted by Ronan Manly, BullionStar.com

Towards the end of July, news emerged in the Russian media that Moscow and a number of its Eurasian allies are now reviewing a proposal to create an entirely new trading and pricing infrastructure for the international precious metals in order to both destroy London and New York’s monopoly over global precious metals pricing, and to stabilize the Russian gold market.

This infrastructure would take the form of:

 
  • a Moscow World Standard (MWS) for precious metals trading, akin to the London Good Delivery List of the London Bullion Market Association (LBMA)
  • a new international precious metals exchange (trading venue) headquartered in Moscow based on the MWS, and known as the Moscow International Precious Metals Exchange
  • a Price Fixing Committee, with price discovery and new precious metals price fixings based on the MWS, and reference prices derived in the national currencies of participant countries or in new international settlement units

This article will review these developments, explain who has proposed them, explore the potentially wide range of countries that could participate in such a system, and look at the originators’ thinking on what gold and other precious metals pricing should be based on....

[ARTICLE CONTINUES] https://www.zerohedge.com/markets/eurasian-alliance-plans-moscow-world-standard-destroy-lbmas-monopoly-precious-metals

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