Energy – Part V

Posted on January 30, 2023 by Timeless Investor

Energy and Metals – Part V

Critical dates

  1. Tuesday, November 8, 2022 – US midterm election
  2. 32nd OPEC and non-OPEC Ministerial Meeting on 5 September 2022
  3. We can wait for the EIA monthly data to come out but in order to validate the July data, we would have to wait until the end of September.
  4. China is set to convene a historic meeting on Oct. 16, “We expect the zero Covid policy to be revised after the meeting in Oct, which will help the economy to normalize,” Zhiwei Zhang, president and chief economist, Pinpoint Asset Management, said in a note.
  5. OPEC next meeting Oct 05, 2022
  • 01/31/2023 –

Column: Investors have become super-bullish about oil

Everybody Loves Oil Again

https://www.benzinga.com/quote/XOP/short-interest

https://www.optionistics.com/stock-prices/XOP

https://www.wsj.com/market-data/quotes/etf/XOP?mod=searchresults_companyquotes&mod=md_usstk_hdr_search

https://www.gurufocus.com/etf/XOP/summary?search=xop#guru-summary|holding-history

https://stocktwits.com/symbol/GUSH

  • 01/11/2023

1995-Afternoon Session-BRK Annual Shareholders MeetingBerkshire Hathaway Annual Shareholder Meetings (since 1994)

  • 01/05/2022

https://seekingalpha.com/article/4567039-2023-three-energy-macro-themes

  • 12/21/2022 –

Fed Chair Powell delivers remarks following FOMC meeting

  • 12/19/2022 –

Josh Young: Oil Price Correction Almost Over? Chinese Demand Coming Back Online?

Widow-maker trading | Energy & Inflation | WTI & SPR [The Week Ahead – 19 Dec 2022]

  • 12/08/2022 –

https://seekingalpha.com/article/4563359-revisiting-the-oil-bull-thesis-part-1

https://openinsights.substack.com/p/the-oil-market-in-a-nutshell

https://www.energyintel.com/00000184-eee1-ddba-a3b6-ffe96c560000

  • 12/12/2022

Josh Young: What’s Happening With Oil? The ROI Podcast Ep 17.

  • 2012/05/2022

U.S. has geopolitical advantage being as world’s largest oil and gas producer, says Dan Yergin

Where Are We in the Energy Cycle, A Framework (Spoiler: It’s Early Days)

Become a subscriber today (wsj.com)

https://www.ebay.com/itm/334605862193?hash=item4de8104531:g:m5sAAOSw1oVi-a8h&amdata=enc%3AAQAHAAAA4KwL0ZcN1fyB%2FAf73CE8LK9pbf7758hQCwv32lM62ydzOMRTebvQhn4MJi9vn31ywaQaiG3VHPPBrB94dDLPxgbPUBdLRGx78s%2FH3zUlFAvqS1if%2BQ027yzATizbkbWVBV8cvh7h3%2FsqDXXFKuqrzcz%2BZhV6fz4jYcmgI2UkSRkMjqgxJAj4OSq%2BHVckOxgXabkac00Yv5PILYEzrLZk6FMsUatRYsjFt%2B%2FR0INb%2B0NqyzIUJgBWJ1sOi6lVt%2FyWpU0nZJEshzBKvSy2mMyvFLVkw8k3oEZAA3QTZAy0Y1sf%7Ctkp%3ABFBMjtuG5Jxh

  • 11/30/2022

Fed Chair Powell speaks at The Brookings Institute on economic outlook — 11/30/22

Jerome Powell Signals Fed Prepared to Slow Rate-Rise Pace in December – WSJ

  • 11/27/2022 – Oil stocks are still cheap, but I need to be cautious

Oil Stocks Are Showing A Peculiar Disconnect From Crude Prices

  • 11/25/2022

The super cycle ahead in the energy world | eToro webinar with Josh Young

  • 11/14/2022 –

The Oil & Gas Sector Presents a Tremendous Opportunity Right Now: Josh Young

The Energy Crisis Is Only Getting Worse | Josh Young

  • 11/10/2022 –

https://www.hartenergy.com/forty-under-40/2022/josh-young

  • 11/01/2022  – Josh Young – how to invest in Oil bull market: do not try to time the market because short term speculation is impossible and can always by very wrong, we need to keep buying in any dip
  • 11/01/2022 – Kuppy’s recommendation

When Will The Fed Slow Down? (Not Now.) | Nick Timiraos & Joseph Wang

  • 10/31/2022 – windfall tax implication?

Image

  • 10/20/2022 –

President Biden Delivers Remarks on Rebuilding Our Nation’s Infrastructure

  • 10/19/2022 – news

Biden Says He Will Keep Tapping Oil Reserves – WSJ

  • 10/19/2022 – will price cap turn into price hike?

“I’m not aware of anybody — certainly at the senior political level — who comes close to Amos in terms of understanding the realities of the energy industry,” said Bob McNally, president of Rapidan Energy Group, a consulting firm. “I call him President Joe Biden’s energy whisperer.”

  • 10/14/2022- price cap plan in the next couple of weeks?

U.S., Allies Negotiating Price Level for Russian Oil Cap – WSJ

The U.S. and its partners are rushing to hammer out an agreement on a level for a price cap on Russian oil in the next couple of weeks as they seek to contain global oil costs in the wake of a production cut by the Organization of the Petroleum Exporting Companies and its Russia-led allies.

The Group of Seven large advanced democracies, along with Australia, are working to put into place a plan ahead of a Dec. 5 deadline that would bar the use of financing, insuring and shipping services for Russian oil unless the oil is sold below a set price limit.

Officials involved in the talks are aiming to establish and release the full price-cap plan at least a month ahead of the December deadline to give markets time to prepare for the novel sanctions regime.

  • 10/12/2022 – implication of China reopen

Why China shows no sign of backing away from its ‘zero-Covid’ strategy

  • 10/07/2022 –

https://twitter.com/i/spaces/1gqxvyLokOwJB

Fury at Saudi Arabia revives calls for US to throw the book at OPEC

Short for the No Oil Producing and Exporting Cartels Act, NOPEC would empower the Justice Department to go after Saudi Arabia and other OPEC nations for antitrust violations.

Yet some analysts warn such a move could backfire, setting the stage for a tit-for-tat battle with the world’s largest producer group that drives gasoline prices even higher.

“NOPEC is like a nuclear bomb. It’s hugely risky,” said McNally, who served as top energy official to former President George W. Bush. “If you don’t have somebody managing supply, you get space mountain oil price volatility.”

there are lots of reamplifications of NOPEC bill, previous presents all hate it. But if Biden has to use it, it should go very quickly

 

The changing world map of oil

LIVE: President Biden tours Volvo and speaks about building the economy

  • 10/06/2022 –

Biden Weighs Options After OPEC+ Moves to Cut Oil Output – WSJ

  • 10/05/2022 – OPEC+ meeting

https://www.opec.org/opec_web/en/multimedia/349.htm

OPEC+ Agrees to Biggest Oil Production Cut Since Start of Pandemic – WSJ

  • 10/04/2022 –

Bob McNally said OPEC+ wants oil price stability. the battle will goes on – bear from economic recession, and bull for Russia oil supply to lose

Daniel Yergin said it will be interesting to see how Russia responses to oil price cap plan which has already been accepted by EU

  • 10/03/2022 – pressure on Fed’s OT is mounting, Fed will stay the course?

U.N. Calls On Fed, Other Central Banks to Halt Interest-Rate Increases – WSJ

Central Banks’ Higher Rates, Bond Sales Clash With Government Needs – WSJ

  • 09/29/2022 – be alert to the pension fund risk

Pension Strategy Left Funds Vulnerable to Rate Increases – WSJ

  • 09/29/2022 – Tracy’s viewpoint on SPR release: The SPR release eliminates the need for the futures market or the OTC market because everyone knows it’s coming, so, why not sit back sit back and wait for the price to go lower? This also explains a bit of the horrific lack of liquidity right now.

Valero, Marathon top beneficiaries of U.S. emergency oil releases

Oil refiners Valero Energy Corp VLO.N and Marathon Petroleum Corp MPC.N are the biggest beneficiaries of the U.S. government’s oil reserve releases, taking nearly half the crude offered, a Reuters analysis of Department of Energy data showed on Wednesday.

The Biden administration has opened spigots at the nation’s Strategic Petroleum Reserve (SPR) to lower fuel prices and ease a supply crunch from Russia’s invasion of Ukraine. Awards of about 218 million barrels for the 12 months ended Sept. 30 have tamed market worries and cut energy prices.

But they have slashed the reserve to 427.2 million barrels – or about four weeks of demand – the lowest level in about 38 years. This has sparked criticism because some oil was resold to buyers overseas. A few distributions came under congressional mandates while others are pending.

The two biggest receivers acquired nearly 98 million barrels so far. Valero, the second-largest U.S. refiner by capacity, secured 52.7 million, while top oil processor Marathon Petroleum snapped up 45.2 million barrels.

Other big buyers included Exxon Mobil XOM.N, with 24.7 million barrels, and Motiva Enterprises MOTIV.UL at 22.1 million, Shell SHEL.L at 15.2 million and Phillips 66 PSX.N at 16 million. -Reuters

COMMENTARY: Here is what I believe is happening., regarding this dislocation of price versus the actual physical market. Most of this oil was sold via auctions at prices determined by a five-day average around the date of delivery. Refiners have every incentive not to go to the futures or OTC markets because they know that the SPR is there. The point is why step in when the market is “cheap” and when you know you can buy from SPR. Take for example VLO who is only a buyer of physical oil. If they use the futures market to sell it’s a hedge against a cargo but it’s a no lose situation to abandon the futures market or at worse pressure it because you know the SPR is there for you.  In a tight market, you have to secure a seller when storage is empty so you may buy futures as a last resort or hedge to assure you have the molecules. The SPR release eliminates the need for the futures market or the OTC market because everyone knows it’s coming, so, why not sit back sit back and wait for the price to go lower? This also explains a bit of the horrific lack of liquidity right now.

The real question is when do the physical players start to price in the end to SPR and need to go out and secure the molecule in a very tight market, which in turn will surely cause a spike in prices.

I think the administration knows that is exactly what is going to happen because just last week they push out the remaining 10 million barrels of releases into November. Releases were supposed to be completed by the end of November, which means refiners would have to start looking for products beyond the SPR in a tight market. Likely ensuring an oil price spike right into midterms.

My last thought, when faced with complex and difficult to quantify risks, markets usually default to shorter-term fundamentals and prevailing biases rather than macro winds. We are seeing that play out. But if and when a dislocation materializes, prices are now primed for a violent upward response.

  1. Warren Buffett’s Berkshire Hathaway (NYSE:BRK.B) (NYSE:BRK.A) scooped up almost 6M more shares of Occidental Petroleum (NYSE:OXY), bringing the investment company’s holdings to 194.5M shares, or ~20.9% of the petroleum company’s outstanding common stock, according to a filing submitted late Wednesday.
  2. That’s up from 20% as of Aug. 30. Berkshire (BRK.B) bought the 5.99M shares in several transactions from Sept. 26 to Sept 28, at prices ranging from $57.67 per share to $61.595 per share.

About Timeless Investor

My name is Samual Lau. I am a long-term value investor and a zealous disciple of Ben Graham. And I am a MBA graduated in May 2010 from Carnegie Mellon University. My concentrations are Finance, Strategy and Marketing.
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