The oil market is in the middle of another sharp leg lower. This is going to jolt the players and be painful. Today will not be fun for me. I’m going to have to grin and bear it and distract myself with a bag of popcorn and the spectacle of fifty million hardcore Democrats breaking down live on public access television tonight.
The impetus for the announcement might be, allegedly, a December price cut by Saudi Arabia to US markets.
This is the key takeaway here:
Top global exporter Saudi Arabia increased its December official selling prices (OSPs), relative to benchmarks, to Asia and Europe on Monday, but lowered prices to the United States, a smaller export market.
Which is to say that Saudi Arabia actually raised prices in December.
Guys, come on. Saudi Arabia’s oil market is Europe and Asia, almost entirely. They don’t sell diddly in the United States. Our oil comes from South America and Canada. You can easily check this via public records – the EIA, I believe it was, keeps detailed records about global oil sales, including by country of origin and destination.
If Saudi Arabia is lowering prices on little to no volume sold, then Saudi Arabia is not lowering prices.
In practice, this leg lower probably has less to do with Saudi Arabia and more to do with what is to be expected in a correction like this. This is not the first time I’ve been in a position that bleeds out, to see a moment of stability followed by more sharp bleeding.
APC comes to mind back when that oil well blew in the Gulf. Uranium prices did the same thing. And shares of gun manufacturers after Sandy Hook.
You get a big blowup, some tepid stability, then another collapse.
The second collapse is usually the best buying point. Usually…
If you enjoy the content at iBankCoin, please follow us on Twitter
Lovely. I suppose this is the time to go see about a sandwich then.
Looking forward to HCLPs CC
Good sir – if you were to allocate money with almost no oil positions (with the exception of a small BAS position and TRN) where would you allocate? More BAC, HCLP, NOV, HAL, CVX? Thanks!
Oil majors in foreign lands are best avoided. As are newer fracking plays, since they are, presumably, higher cost of extraction.
You’re looking for a combination of operations (oil & energy, services, materials, etc) near to the cheaper fracking wells in the US.
I’d stay domestic since one of the big question marks here is, what will happen to those third world countries as their budgets come under pressure?
My guess is we see a repeat of the same theme; third world dictatorship crumples in So And So nation, oil production plummets to zero, long brutal civil war rages.
I’d also avoid the deep sea stuff; too expensive. I have one name on my books (NADL) but it has more to do with oligarchy money coming to the rescue.
Thank you – what would your top three oil stocks be right now. Yes I am a lazy leach and looking for the easy answer here.
Any of the fracking plays for sure. HCLP, SLCA, etcetera.
The next recommendation would be hard to pin because I’d have to know more about your personal situation.
I like BAS, but am terrified of their industry peers. And even BAS is very volatile, if you hadn’t noticed.
I also want to stay firmly away from the majors. Big dinosaurs are the first to die when the comet hits.
I like ETP and own it; that’s a pipeline play.
Thankyou – I started a position in HCLP this morning.
Cain, how do you feel about picking up some $BCEI here? Should i wait for more consolidation? Also, as an aside, thank you so much for your guidance here through the energy sector. Has been so useful in this time of chaos.
I don’t know enough about BCEI to make the call right now, and I don’t have time at the moment to look. I’ll try and squeeze in a review later in the week. Remind me.
Also, just picked up $HK. Thinking nat gas producers are good here into the winter. Thoughts?
http://in.reuters.com/article/2014/11/04/saudi-oilprices-kemp-idINL6N0SU43520141104