If WTI can close several days in a row above $40/bbl it will set the base for a march back to the long-term trend line.
Data on the U.S. economy looks good and economic data on Europe is looking better. Low fuel prices are a big stimulus for the global economy. China's demand may slow but I saw a report yesterday that China plans to keep buying oil to fill their own strategic petroleum reserves. U.S. should be doing the same thing, but Washington is too stupid.
Oil Price
Re: Oil Price
From Stifel this morning (8/27):
In our view, this cycle will clearly last longer than the one precipitated by the financial crisis of the past decade although
similarities are worth noting. Large-cap E&P stocks lead oil price, which lead the oil rig count during both cycles. As such,
we look for stocks of large-cap companies with strong assets and solid balance sheets to break away from oil prices again
before the latter reach bottom for a second time during this cycle. We also expect the U.S. oil-directed rig count to reverse
course and head back down. Most small-cap stocks followed oil prices closely through the last cycle and even lagged the
commodity’s recovery. Accordingly, we would not wait for oil to bottom before buying high quality large-cap stocks such as
EOG, CXO, NBL, XEC, and PXD. Mid and small-caps that are financially well positioned include SM, NFX, GPOR, PDCE,
and SYRG.
In our view, this cycle will clearly last longer than the one precipitated by the financial crisis of the past decade although
similarities are worth noting. Large-cap E&P stocks lead oil price, which lead the oil rig count during both cycles. As such,
we look for stocks of large-cap companies with strong assets and solid balance sheets to break away from oil prices again
before the latter reach bottom for a second time during this cycle. We also expect the U.S. oil-directed rig count to reverse
course and head back down. Most small-cap stocks followed oil prices closely through the last cycle and even lagged the
commodity’s recovery. Accordingly, we would not wait for oil to bottom before buying high quality large-cap stocks such as
EOG, CXO, NBL, XEC, and PXD. Mid and small-caps that are financially well positioned include SM, NFX, GPOR, PDCE,
and SYRG.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price
dan, some interpretation needed here. what cycle? sorry for being slow.
Large-cap E&P stocks lead oil price??
which lead the oil rig count during both cycles??
We also expect the U.S. oil-directed rig count to reverse
course and head back down. bearish?
thx for your patience.
jim
Large-cap E&P stocks lead oil price??
which lead the oil rig count during both cycles??
We also expect the U.S. oil-directed rig count to reverse
course and head back down. bearish?
thx for your patience.
jim
Re: Oil Price
CL's two month old down trend line on was broke today on very high volume.
Re: Oil Price
"Cycle" = the current oil price cycle. All previous cycles (from high to low and then back to the long-term trend line) have lasted approximately two year. This one started in July, 2014 so we are now half the way there. Only the one in the late 80's lasted longer because OPEC had over 13 million bbls of excess production capacity at that time. Today, OPEC has almost no excess capacity.
In each cycle the Large-caps tend to lead the rebound in share prices because the fund managers (most of which know very little about the cycle) feel more comfortable with owning them.
Active rig count is going to drop again until oil is back near $60/bbl. This is actually bullish for the sector because it will push up oil & gas prices. Upstream companies will be slow to ramp up drilling activity. This is bearish for the service companies.
In each cycle the Large-caps tend to lead the rebound in share prices because the fund managers (most of which know very little about the cycle) feel more comfortable with owning them.
Active rig count is going to drop again until oil is back near $60/bbl. This is actually bullish for the sector because it will push up oil & gas prices. Upstream companies will be slow to ramp up drilling activity. This is bearish for the service companies.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price
ahhh, thx, dan--all makes sense now.