Hi all,
I am looking to take advantage of the recent stock market dip and am considering buying into oil as I feel this sector has room for a substantial rebound.
In particular I am looking at BP and Shell. Would love to hear any views you have as I feel they will recover well and the infrastructure for alternative energy is a way off.
Regards
Magicmerve
I have been investing since 2008 when I started a job with Lloyds Banking Group and had seen the crash in share price when taking over HBOS, but since a child I have always been interested in how the stock market works. I was introduced to "The Naked Trader" by Robbie Burns and after finishing that I was away. I've since read "The Intelligent Investor" by Benjamin Graham and am a keen follower of Warren Buffett. I currently work as an operational training specialist for a FTSE 100 company and when not working can be found either out on my mountain bikes, behind the wheel of my racing simulator at home or on this site searching for wonderful shares. Fun fact: I was born on the same day the first back to the future was released and when DeLorean went bust my great uncle bid to purchase all of the scrap metal........he didn't win so bought some old tanks instead. more »
well I am no expert AT ALL, but windfarms are doing ok, and there seems to be a push for electric cars, possibly making me think twice about fossil fuels.
I notice with interest today that Neptune have paid Energean Energean Oil & Gas (LON:ENOG) £4M ($5M) NOT to go ahead with the on purchase of Edison's North Sea (UK & Norway) assets from £ENOG. Edison's sale to Energean is not yet complete.
Other players deals in hand - Premier Premier Oil (LON:PMO) for one may well be "involved and ongoing due to the Oil price" (My quotes)
Note:- I am not long in any O&G Stocks currently but it is a volatile sector I follow
I think there will plenty of demand for oil for a long time yet, those sort of comments were around 30 years ago. What about all the new cars in countries such as India/China, most of those will run on petrol. Electric vehicles take-up has been rather slow, I heard SUV had overtaken EVs last year in the UK and they use more petrol/diesel than cars. EVs will come in but not for a while and with cheap petrol there is less incentive to buy. I have looked at some wind turbine producers but did not find them that attractive. Oil price went down because of a fallout between Saudi Arabia and Russia.
Shell now at 25 year low (933p) . Clearly oil is under pressure LT from decarbonisation but Shell also majors in gas and is an 'energy' brand. Unlike some of the other oil majors it can transform itself over time. Sadly, economic turmoil will slow environmental moves, pushing out period of oil use in developing markets.
COVID will almost certainly be behind us in 18months - a short term blip in energy terms. Long term investment in new fields is being slashed so supply will slowly tighten.
Big risk to me is that state owned oil producers decide to dump currently pumpable oil volume on the market to raise short term (next 5-10 years) cash. This would keep the oil price low and the world has excess supply for now.
I am buying Shell but prepared to wait 3-5 years for my return.
Probably
But I'd hazard that as the great invisible yet omniscient capital cycle turns banks in UK are the clear sugar.
We may have a future where these institutions are dysfunctional and irrelevant but I find it hard to believe this in anything but a catastrophic environment (one were owning Amazon is not your safety valve). Politics and society is turning. It is clear the 2010s didn't work for the little man or many little more mundane companies. Covid accelerates the acuteness of the unwholesome juxtaposition between old and new. It ensures that radical remedial steps come sooner rather than later. We have had hints of how oceanic is scale bank balance sheets can be used as a prop for macro policy....the penny has dropped and we will have more. You may say this makes them political utilities and turn up your nose...but this is lots more activity, govt backed and expansionary. And unless you think we in the UK will seek to socialise our banking that means success will be allowed.
Its very hard to see and believe today. I have >25% of my portfolio today in financials (mainly non banks credit or capital market services providers). However only 4% is in banks (split between 4 of them!) as I can't see clearly through the macro clouds and the hangover from 2008. But I want to be in the game now as I do believe banks (in UK and probably US at least) will be one of the big game of the 2020s.
Fossil fuels should be around for at least more 20 years however there will be increasing pressure on Investment Funds and Sovereign Wealth not to hold Fossil Fuel shares which means Oil Majors may look cheap for a long time because of a lack of institutional buyers
Mojomogoz given the rumour is central banks have unleashed five times as much new trillions as they did in 08/09 do you think we will ever have a catalyst where QE forever stops working. I used to worry about the state of the world debt but it seems it doesn't really matter any more as all the big economic powers are in the same boat.
I'm convinced at some point all the money owed to central banks will be written off as quickly as it was created would normally crush your currency but if all the developed world do it at the same time they could probably pull off the global debt reset.
Of course the whole process would then start again.
Regards Andy
A simple chart showing the $WTIC (West Texas Intermediate Continuous Contract) versus $OVX (Oil Implied Volatility). When implied vol rises price falls. Implied vol is rising ...
Is Oil a buy? ... Probably not yet.
clarea, I generally agree with you.
Money and so debt is not very real...or is as real as we want to make it. This is the lesson of 2008 and aftermath.
Modern Monetary Theory is correct in many respects and particularly that country with currency sovereignty can't run out of money....and more controversially for many we don't sell debt to create spending power for govt, rather the govt decides to spend and then has, so far, taken the decision to match any overspend relative to income/taxes with debt issuance. This is irrefutably true. Through a similar mechanism excess debt can be retired/Jubileed too.
We will go down this route as it is the only expedient one. That said I do worry that Sunak and the Tories will catch a bout of Osborne's Austerity-Tory-itis. This would be self harm beyond comprehension! Hopefully those gauche Americans show us the way.
A version of what you say operated post WW2 whereby yields where held low (yield curve control) and inflation eroded the debt away. This was fine until the 70s and a combination of oil price war and, less appreciated, a boom linked to demography in the US.
Long term and I believe that oil is finished but taking a long term view and many industries will probably no longer exist. As some posters have pointed out, forecasters predict that reasonably strong oil demand will be around for at least another 20 years. To that, I would add something that is rarely discussed. These assumptions are based on global peace. Should that change, then the oil price could skyrocket. Refineries, tankers, pipelines were all constructed based upon peace. They are large, costly, difficult to replace and easy to hit targets. And, of course, a large proportion of the world's oil is coming from unstable countries. Taking a long term perspective and much can happen, as we see with COVID-19. Put simply, I don't think that oil is quite as dead as some people assume. While global peace and stability could change in literally minutes.
Mojo this actually came up after I responded yesterday Stocko won't let me paste the full link in but google 150 billion of UK debt disappear's my personal opinion it;s only way out for the Western world.
I believe this is sensible and we should do it more. My guess is that financial markets will welcome it as a policy particularly if they see it as tied to a program of investment not just spending. Obviously we can't just wipe out all the debt as it performs a function in the economy but there is no need to link govt spending to debt issuance.
The Americans have done it slightly differently but on a grand scale too. It is not direct monetary financing (I believe this would be illegal at present under Federal Reserve Act) but a roundabout route. This chart is the Treasury General Account at the Fed, effectively the federal govts ready spending cash. Effectively, the US Treasury has siphoned off $1.5tr during the March-June period when the Fed was very actively supporting US govt bond market
This is a figure of approx 8% of US GDP of cash sitting there waiting to spent. There are some congressional limitations on how the money can be spent (or their approval is needed) but I'd have thought that executive power can get round that in many ways. Its been a surprise to me that Trump has not promised to spend this money ahead of the election....I assume he will but I'm wrong so far and the clock is ticking down....I think there will be some dramatic stimulus promises from him soon. This is money beyond any stimulus talk in the US currently locked up in political fighting.
Pre coronavirus the world was consuming around 100 million barrels of oil per day. Obviously that has dropped post coronavirus. Due to the need to reduce CO2 levels and the fact we are slowly killing the planet, the future is renewable energy. It is forecast that by 2050 the world's oil consumption will fall to around 70 million barrels of oil per day. Obviously, we still need oil for the petrochemical industry but the way we generate electricity and our mode of transport will change, hence the need for less oil. In my opinion oil is a long but slowly dying industry but it may take 50 years to die. Furthermore, looking at the known oil reserves throughout the world, it has been calculated (at pre covid 19 consumption) that there are around 50 years of oil supply left. This doesn't include any unknown and yet undiscovered reserves but the moral question is whether we should extract that oil from the ground and further exacerbate global warming?
It may not be on everyone's radar but Trinidad's new Government has just given its first budget. And there were substantial changes in the imposition of its Supplemental Petroleum Tax (SPT). Essentially, this kicks in when the price of oil averages more than US$50 per barrel over a calendar quarter period. A tad under US$50 or a tad over US$60 and oil producers are fine but between US$50 and US$60 and they are heavily penalised. The reforms relate to small onshore and offshore producers as well as mature fields. Broadly speaking, for an asset or licence producing less than 2,000 BOPD, SPT will now kick in when oil averages over US$75 for a calendar quarter period. That's a major improvement in cash flow for Trinidad's small oil producers. The reforms will take effect from January 1st 2021 and will be in place until the end of 2022 when they will be reviewed. More broadly, Trinidad's Government has committed to reviewing the Petroleum Taxes Act with a view to simplifying it. The country is heavily dependent on oil and gas revenues and appears determined to attract investment into the sector.
There are several London listed oil companies with exposure to Trinidad. And, yes, I'm invested in one of them.
I sold my BP and RDSB at the start of the year.
So far, this is one of my decisions that doesn't keep me awake at night. :-)
I can't wait to have an electric car connected to renewable energy, and with A.I. safety/security/comfort technology.
