Investing

is now the time to invest in oil stocks?

  • Last Updated:
  • Nov 25th, 2020 7:23 pm
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Jr. Member
Feb 23, 2015
159 posts
37 upvotes
Hampstead, QC
I missed the boat with CNQ, novice error set the limit price a bit low. What would be the one you pick now?
Jr. Member
Nov 17, 2016
149 posts
92 upvotes
vinajackfruit wrote: I missed the boat with CNQ, novice error set the limit price a bit low. What would be the one you pick now?
I always recommend CJ as the best small Canadian upstream oil company. It is getting up there in price along with the rest of them though.
Deal Addict
Aug 17, 2008
4480 posts
3723 upvotes
I've been out all day, but I put in a $41.97 bid for SU this morning. It looks like I have the only trade so far. A partial fill. Hope to get the balance at MOC.

Update: D*ck for a tick :(
There's always Monday.
Last edited by MrMom on Sep 20th, 2019 4:04 pm, edited 1 time in total.
Deal Addict
Aug 17, 2008
4480 posts
3723 upvotes
@da7474 and @IrwinW, we nailed the analysis here, here, here and here.

Failed on the execution, post above, based on the latest articles.

Via Forexlive, https://www.forexlive.com/news/!/oil-ar ... s-20190922

And WSJ, https://www.wsj.com/articles/aramcos-re ... 1569180194
Sept. 22, 2019 3:23 pm ET

The Saudi Arabian Oil Co. is in emergency talks with equipment makers and service providers, offering to pay premium rates for parts and repair work as it attempts a speedy recovery from missile attacks on its largest oil-processing facilities, Saudi officials and oil contractors said.

It may take many months—rather than the maximum 10 weeks company executives have promised—to restore operations to full working order, they said.

Following a devastating attack on its largest oil-processing facility more than a week ago, Aramco is asking contractors to name their price for patch-ups and restorations. In recent days, company executives have bombarded contractors, including General Electric , with phone calls, faxes and emails seeking emergency assistance, according to Saudi officials and oil-services suppliers in the kingdom.

One Saudi official said costs could run in the hundreds of millions of dollars.

Saudi Arabia and the world’s most profitable company are struggling to recover from the attacks, which came within weeks of the Saudi government reviving plans for its on-again, off-again initial public offering of Aramco shares. Now, the IPO, the company’s financial health and the country’s economy may be in danger, say Saudi officials and advisers.

Saudi officials and Aramco executives have been consistent since the attacks, communicating statements aimed at reassuring oil markets that the state-owned company will recover quickly while continuing to supply customers as usual.

On Saturday, Aramco’s Chief Executive Amin Nasser reiterated production would be back to its precrisis level by the end of the month. “Not a single shipment to our international customers has been missed or canceled as a result of the attacks,” he said. The company intends to return to its maximum output capacity by the end of November.

Aramco already has begun shipping equipment from the U.S. and Europe to rebuild damaged facilities, said Fahad al-Abdulkareem, the general manager of southern operations at Aramco.

Saudi officials say there is little sense of calm at the highest levels of the company and the Saudi government, however. It could take some contractors up to a year to manufacture, deliver and install made-to-measure parts and equipment, the Saudi officials and the oil contractor said.

“We are still in a frantic search for spare parts,” one Saudi official said. “It is not really as great as rosy as you may think.”

Little more than a week has passed since Khurais oil field and Abqaiq, the world’s largest oil-processing facility, were struck by missiles, causing the largest single outage the oil industry has ever seen. The attack knocked out 5.7 million barrels a day of Saudi crude-oil production—about half the country’s output and nearly 6% of global supply.

The Trump administration and Saudi Arabia have blamed the attack on Iran, which has said it wasn’t responsible.
Deal Guru
Jan 27, 2006
14834 posts
7771 upvotes
Vancouver, BC
MrMom wrote: @da7474 and @IrwinW, we nailed the analysis here, here, here and here.

Failed on the execution, post above, based on the latest articles.

Via Forexlive, https://www.forexlive.com/news/!/oil-ar ... s-20190922

And WSJ, https://www.wsj.com/articles/aramcos-re ... 1569180194
Sept. 22, 2019 3:23 pm ET

The Saudi Arabian Oil Co. is in emergency talks with equipment makers and service providers, offering to pay premium rates for parts and repair work as it attempts a speedy recovery from missile attacks on its largest oil-processing facilities, Saudi officials and oil contractors said.

It may take many months—rather than the maximum 10 weeks company executives have promised—to restore operations to full working order, they said.

Following a devastating attack on its largest oil-processing facility more than a week ago, Aramco is asking contractors to name their price for patch-ups and restorations. In recent days, company executives have bombarded contractors, including General Electric , with phone calls, faxes and emails seeking emergency assistance, according to Saudi officials and oil-services suppliers in the kingdom.

One Saudi official said costs could run in the hundreds of millions of dollars.

Saudi Arabia and the world’s most profitable company are struggling to recover from the attacks, which came within weeks of the Saudi government reviving plans for its on-again, off-again initial public offering of Aramco shares. Now, the IPO, the company’s financial health and the country’s economy may be in danger, say Saudi officials and advisers.

Saudi officials and Aramco executives have been consistent since the attacks, communicating statements aimed at reassuring oil markets that the state-owned company will recover quickly while continuing to supply customers as usual.

On Saturday, Aramco’s Chief Executive Amin Nasser reiterated production would be back to its precrisis level by the end of the month. “Not a single shipment to our international customers has been missed or canceled as a result of the attacks,” he said. The company intends to return to its maximum output capacity by the end of November.

Aramco already has begun shipping equipment from the U.S. and Europe to rebuild damaged facilities, said Fahad al-Abdulkareem, the general manager of southern operations at Aramco.

Saudi officials say there is little sense of calm at the highest levels of the company and the Saudi government, however. It could take some contractors up to a year to manufacture, deliver and install made-to-measure parts and equipment, the Saudi officials and the oil contractor said.

“We are still in a frantic search for spare parts,” one Saudi official said. “It is not really as great as rosy as you may think.”

Little more than a week has passed since Khurais oil field and Abqaiq, the world’s largest oil-processing facility, were struck by missiles, causing the largest single outage the oil industry has ever seen. The attack knocked out 5.7 million barrels a day of Saudi crude-oil production—about half the country’s output and nearly 6% of global supply.

The Trump administration and Saudi Arabia have blamed the attack on Iran, which has said it wasn’t responsible.
All you need to do is to look at the damage to the equipment to know that the Saudi estimate for repairs is a pile of ()*(&^!! I suspect that once the Saudi's run out of reserves (which they are using now to fill the tankers), we will see a marked increase in the oil price which should hold for, at least, until the end of the year.
Jr. Member
Sep 16, 2012
107 posts
64 upvotes
Calgary
MrMom wrote: @da7474 and @IrwinW, we nailed the analysis here, here, here and here.

Failed on the execution, post above, based on the latest articles.

Via Forexlive, https://www.forexlive.com/news/!/oil-ar ... s-20190922

And WSJ, https://www.wsj.com/articles/aramcos-re ... 1569180194
Sept. 22, 2019 3:23 pm ET

The Saudi Arabian Oil Co. is in emergency talks with equipment makers and service providers, offering to pay premium rates for parts and repair work as it attempts a speedy recovery from missile attacks on its largest oil-processing facilities, Saudi officials and oil contractors said.

It may take many months—rather than the maximum 10 weeks company executives have promised—to restore operations to full working order, they said.

Following a devastating attack on its largest oil-processing facility more than a week ago, Aramco is asking contractors to name their price for patch-ups and restorations. In recent days, company executives have bombarded contractors, including General Electric , with phone calls, faxes and emails seeking emergency assistance, according to Saudi officials and oil-services suppliers in the kingdom.

One Saudi official said costs could run in the hundreds of millions of dollars.

Saudi Arabia and the world’s most profitable company are struggling to recover from the attacks, which came within weeks of the Saudi government reviving plans for its on-again, off-again initial public offering of Aramco shares. Now, the IPO, the company’s financial health and the country’s economy may be in danger, say Saudi officials and advisers.

Saudi officials and Aramco executives have been consistent since the attacks, communicating statements aimed at reassuring oil markets that the state-owned company will recover quickly while continuing to supply customers as usual.

On Saturday, Aramco’s Chief Executive Amin Nasser reiterated production would be back to its precrisis level by the end of the month. “Not a single shipment to our international customers has been missed or canceled as a result of the attacks,” he said. The company intends to return to its maximum output capacity by the end of November.

Aramco already has begun shipping equipment from the U.S. and Europe to rebuild damaged facilities, said Fahad al-Abdulkareem, the general manager of southern operations at Aramco.

Saudi officials say there is little sense of calm at the highest levels of the company and the Saudi government, however. It could take some contractors up to a year to manufacture, deliver and install made-to-measure parts and equipment, the Saudi officials and the oil contractor said.

“We are still in a frantic search for spare parts,” one Saudi official said. “It is not really as great as rosy as you may think.”

Little more than a week has passed since Khurais oil field and Abqaiq, the world’s largest oil-processing facility, were struck by missiles, causing the largest single outage the oil industry has ever seen. The attack knocked out 5.7 million barrels a day of Saudi crude-oil production—about half the country’s output and nearly 6% of global supply.

The Trump administration and Saudi Arabia have blamed the attack on Iran, which has said it wasn’t responsible.
Check out this video if you have time. It gives an up close perspective of how complicated/complex plants are. It is only in 360P though.

Here is another that is similar but in HD. If you go to 5:48 of this video I have worked in that area.
Deal Guru
Jan 27, 2006
14834 posts
7771 upvotes
Vancouver, BC
I just watched an analyst on CNBC's international broadcast stating that the Saudis have told customers that there might be a 7 to 10 days delay in their shipments since the Saudis are trying to move oil from various sources (including reallocating oil meant for domestic refining and their reserves) in order to fill their export orders as they don't want those external customers to go elsewhere. The analyst brought up the issue that with the current tensions in the Middle East, the real question would be is how much of their reserves will the Saudis drawdown and how much will they keep knowing that things with Iran can change in an instant?
Member
May 2, 2019
359 posts
345 upvotes
Vancouver
craftsman wrote: The analyst brought up the issue that with the current tensions in the Middle East, the real question would be is how much of their reserves will the Saudis drawdown and how much will they keep knowing that things with Iran can change in an instant?
From the oil stocks perspective, the current news are mostly noise. Saudi's supply problems are temporary. Whether there is a delay of a week, a month, or two, it can affect oil prices (near-months futures), but not long-term perspectives of oil companies, so doesn't change their fair valuation. Iran are not really interested in having their oil exports banned again. Trump's not interested in a war with Iran at all, especially before elections.

Oil prices could go up long-term if there is a global shock (like a new war in the Middle East), otherwise there are many suppliers willing to step in for the reduced Saudi's exports. On the other hand, demand could drop if a recession is coming. Trying to predict oil prices is an exercise in futility when we don't know which of such major developments is coming next.
Deal Addict
Aug 17, 2008
4480 posts
3723 upvotes
@craftsman The problem with talking heads is (1) they are limited to what they can say on TV, by the broadcaster, for fear of losing the audience with information that goes over the audience's heads, (2) more specific information can be found on Twitter now as that's where the experts have gravitated towards and they are willing to post detailed information unafraid of being too technical. The problem is that we don't know if the tweeter is full of himself or not initially.

What you posted is appreciated, but there have been tweets about the Saudi's scrabbling to buy refined products and to secure VLCC's to transport the refined products since last week. Information lag also goes against the Efficient Market Hypothesis btw for those still sold on it. Just an FYI

It seems like their behaviour in the market varies greatly with what they are saying.
Deal Addict
Dec 1, 2012
1554 posts
1070 upvotes
Lake Simcoe
Is this move real?

Are you buying it, selling it, or avoiding it?

I'm not convinced it's anything more than a oversold DCB.

Thoughts?
Deal Fanatic
User avatar
Sep 8, 2007
8719 posts
9526 upvotes
Way Out of GTA
yvrbanker wrote: From the oil stocks perspective, the current news are mostly noise. Saudi's supply problems are temporary. Whether there is a delay of a week, a month, or two, it can affect oil prices (near-months futures), but not long-term perspectives of oil companies, so doesn't change their fair valuation. Iran are not really interested in having their oil exports banned again. Trump's not interested in a war with Iran at all, especially before elections.

Oil prices could go up long-term if there is a global shock (like a new war in the Middle East), otherwise there are many suppliers willing to step in for the reduced Saudi's exports. On the other hand, demand could drop if a recession is coming. Trying to predict oil prices is an exercise in futility when we don't know which of such major developments is coming next.
I believe your view is consensus and there is not much optimism in the oil stock prices for a long term recovery. I am skeptical myself and sold my energy stocks day 1 of the bounce. But if there is some longer term strength it should be decent as the sector is way underowned right now.
"It is in times of great fear or greed that the most opportunity exists."
Deal Addict
Dec 1, 2012
1554 posts
1070 upvotes
Lake Simcoe
Looks like the excitement is over in energy. At least they caught some fresh meat.....
Member
May 2, 2019
359 posts
345 upvotes
Vancouver
cartfan123 wrote: I believe your view is consensus and there is not much optimism in the oil stock prices for a long term recovery. I am skeptical myself and sold my energy stocks day 1 of the bounce. But if there is some longer term strength it should be decent as the sector is way underowned right now.
For now, it looks like a good call selling those news. I believe there were at least two strong reasons supporting that.

One was purely technical. The oil prices we see are the prices of the futures contracts, which is a smaller and more speculative market than the actual import/export contracts. The unprecedented price jump on Sep 15 was predictably helped by a "short squeeze", when most of the speculators against oil had to close their positions at a loss. Their buying driven the prices up, unrelated to the fundamental supply/demand of oil. In turn, buyers for oil companies stepped in, mixing up a temporary technical surge in future prices with a long-term trend change.
If anything, it's easier for the oil prices to go lower after those short sellers were forcefully removed from the market. That's a very temporary technical effect.

Another reason to sell the drone attack news deserves a separate post. At least, it made me believe the consequences for Saudi Arabia wouldn't be significant.

Without a fundamental change, it is quite dangerous to bet much on the oil stocks as the downside risk is too high. Both oil and oil stocks are still in a technical downtrend (below 200 day average). Demand for oil gets weaker with the declining manufacturing worldwide, and any trouble with the overall economy / stock market can drive the oil sector considerably lower.

Disclamer: I have a smallish long-term position in the oil stock index, which is giving me grief mostly, and sometimes buying some low / selling higher to make it interesting. Last time considered adding on Aug 8 or Aug 16 based on the oversold chart, but decided against that counter-trend trade. Sold my usual small quantity into the strength on Sep 15.

Edit: my trade was on September 16 of course, not 15. Time zone confusion: the action in futures and on Saudi stock exchange started on September 15 my timezone (Pacific time).
Last edited by yvrbanker on Sep 25th, 2019 1:23 pm, edited 1 time in total.
Member
May 2, 2019
359 posts
345 upvotes
Vancouver
yvrbanker wrote: From the oil stocks perspective, the current news are mostly noise. Saudi's supply problems are temporary.
Here's a piece of evidence to support that statement. It was available right away on September 15, before American markets opened.

For some reason, Western media seemed to ignore it. Maybe it was easier to ask local experts and analysts. But wasn't it better to rely on how Saudis perceived the damage and risks? Not what they told you about it (words are cheap). Something they would put their money on. Like ... their stock market?

Exhibit A. Saudi's stock exchange (Tadawul) all stock index before and after the drone attack.
Preface. Tadawul index was declining for 8 weeks straight before the attack. (Cue in conspiracy theorists.)

After the attack, imagine Saudis were afraid of an extensive damage, a future attack or a war, losing customers to other countries. Their stock market selloff would only accelerate, right?

Well, that did not happen. The market opened with a gap down on September 15 as expected, but closed the gap on the same day. It continued going up and finished the last week green, and advanced more this week.

If Saudis are not worried about their situation, should you be?
tasi.png

Note: there is a separate Tadawul energy-only index consisting of 4 companies. A less impressive story, but still: a rather small decline on Sep 15, mostly recovered the same day, more than recovered in less than a week after the attack.
Banned
Aug 23, 2019
897 posts
450 upvotes
cartfan123 wrote: I believe your view is consensus and there is not much optimism in the oil stock prices for a long term recovery. I am skeptical myself and sold my energy stocks day 1 of the bounce. But if there is some longer term strength it should be decent as the sector is way underowned right now.
When balance sheet expansion and more rate cuts come, oil will go up.

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