Investing

is now the time to invest in oil stocks?

  • Last Updated:
  • Oct 18th, 2017 11:36 am
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Newbie
Jan 27, 2016
83 posts
30 upvotes
Toronto, ON
Was reading that Saudi Arabia needs brent at $60-$70 to make their IPO work next year...something to think about
Jr. Member
Jun 28, 2016
197 posts
83 upvotes
loopy1984 wrote:
Sep 14th, 2017 10:03 am
Was reading that Saudi Arabia needs brent at $60-$70 to make their IPO work next year...something to think about
The IPO may not be next year (according to Bloomberg, originally).

http://oilprice.com/Latest-Energy-News/ ... layed.html

There's nothing stopping the Saudis from putting their IPO off until 2019, and 18 months more of 40-55 WTI will bring prices back up without them having to lift a finger, unless demand collapses (in a recession, for example).

The real information to watch is the growth of US shale and demand. The EIA's monthly reports show that the former is majorly underperforming both projections and the weekly data (mind you, the monthlies only go up to June so far) while the latter is far stronger than anticipated. That's what has been driving oil prices up lately, but it remains to be seen whether strong demand and weak shale growth will last. Demand growth could die in a recession, while shale growth may pick up again if WTI starts inching towards $55/barrel again.
Newbie
Jan 27, 2016
83 posts
30 upvotes
Toronto, ON
Well i would love to see hit mid 50's and stay there, I am heavily invested in a small JR oil play from southern USA and we have been surviving bc of our low cost to produce...but so many other companies out there are riddled with debt and can't break even under 50 a barrel.

Thanks for the article and i appreciate your knowledge in the oil sector!
Wavelet wrote:
Sep 14th, 2017 10:26 am
The IPO may not be next year (according to Bloomberg, originally).

http://oilprice.com/Latest-Energy-News/ ... layed.html

There's nothing stopping the Saudis from putting their IPO off until 2019, and 18 months more of 40-55 WTI will bring prices back up without them having to lift a finger, unless demand collapses (in a recession, for example).

The real information to watch is the growth of US shale and demand. The EIA's monthly reports show that the former is majorly underperforming both projections and the weekly data (mind you, the monthlies only go up to June so far) while the latter is far stronger than anticipated. That's what has been driving oil prices up lately, but it remains to be seen whether strong demand and weak shale growth will last. Demand growth could die in a recession, while shale growth may pick up again if WTI starts inching towards $55/barrel again.
Member
Feb 26, 2017
241 posts
59 upvotes
I'd like to get some opinions on KEY.

I've owned it in my RRSP account since 2010 and bought a bit more shares as well back in January. My cost per share is around $24.

I'm thinking of selling it if it get above $40 (its currently at 38.25). It would be a big gain overall but a small gain since the start of the year. From looking at Fast Graphs it looks like I would be leaving money on the table. The main reason for selling would be to reduce the amount is that energy which is about 24% of my portfolio (KEY is about 5% of my total portfolio).

Any opinions on if this is a good/bad idea or opinions on KEY?
Deal Expert
User avatar
Sep 19, 2004
20122 posts
3039 upvotes
Waterloo
KEY and IPL both got upgraded by BMO, leading to 2~4% pop
Should've added more to my IPL (still down 10% at $26 cost) earlier on $22.2, I'm sure it'll come, since TSX Energy just sucks
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Jr. Member
Jun 28, 2016
197 posts
83 upvotes
The problem with this thread is that oil stocks are not the same as oil prices, so the time to invest in oil stocks and the time when oil prices are moving up may not be exactly the same.

Having said that, oil looks on very firm footing at the moment. Global floating storage fell back down to the five year average for the first time in ages in August. US Distillate fuel stocks just dropped below the five year average this week. US Gasoline stocks are just barely above the five year average and now below both 2015 and 2016 levels. At this stage, only US crude inventories remain elevated, but fuel stocks dropping will need to be replaced, and the resulting higher profits from refining are already driving stronger refining activity outside the US (US refiners are still effected by Harvey). On top of that, a fair part of the last two modest builds in US crude inventories came from releases from the strategic petroleum reserve (which is counted separately from commercial inventories, so the post-Harvey/Irma picture so far is even better than it looks at first glance.

Add to that a $6 Brent/WTI spread (in non-Hurricane conditions, as it only costs about $2/barrel to ship oil across the Atlantic, this spread really should not be this high) indicating that the global market is far tighter than the US market (and also a factor which should support very strong US crude exports until the spread narrows) as well as the EIA getting caught drastically overestimating US shale production growth, and it's looking like the next few months may be very good for WTI.

As always, no promises when it comes to oil, as some weird geopolitical event (collapse of the OPEC deal, for example) could derail the bull run in WTI, but this is definitely the most supportive picture (in terms of fundamentals) we've seen for oil since 2014. There are some very short term concerns that oil tankers stranded in the Gulf by Harvey/Irma may have streamed in as ports and refiners really got back into gear this week, which could lead to short-term price pressure next week, if US imports surge, but I will probably treat such a dip as an opportunity to add, if it materializes. I'm becoming increasingly confident that WTI will at least make a run at $55 before the end of the year, and even $60 is not completely out of the question, if the Harvey shake-out keeps looking as bullish as it has these last two weeks.
Member
User avatar
Oct 14, 2015
208 posts
23 upvotes
Drumheller
Thanks for another excellent post, Wavelet.

For anyone wondering about the strategic petroleum reserve (SPR), as I was;
here is a Washington Post article from May.

https://www.washingtonpost.com/news/ene ... e3f707c9f3

Here's a snip from that article. I don't know of any changes to the plan, although I'm sure there will be opposition to it.
Selling half the reserve over a full decade would have limited impact on world oil prices. The sale would amount to just 74,000 barrels a day, a modest amount of global consumption of 96 million barrels a day. But it would slow down efforts by the Organization of the Petroleum Exporting Countries to reduce global inventory levels that are near record highs.
Deal Addict
User avatar
May 25, 2008
1118 posts
311 upvotes
Mississauga
Anyone here hold the Twin Butte convertible debentures? If so, check your account activity. I received a nice payout from a purchase back in Feb. 2016 that I pretty much forgot about. TBE went into receivership last year. TBE common shareholders got 0. The debenture holders were offered $14/100 but they voted no on the offer. The matter went to the courts and long story short deb holders are now getting a minimum 67/100 with possibly more to come. I bought a modest position at 11/100, so this will be at least a 6 bagger. Check your account if you hold TBE.DB. Details: http://business.financialpost.com/news/ ... tte-energy .
Member
Jan 8, 2009
449 posts
69 upvotes
ipl was pretty beaten up. disproportionately so compared to those other names?

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